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What is the ‘Breathing Space’ scheme?

18th May 2021

The Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 is a scheme whereby people are allowed a temporary period of respite from a creditor, (landlord or letting agent) to help those in problem debt (tenant), giving them time to engage in professional debt advice. Essentially it pauses any enforcement action, contact, or incurring interest on a person’s debt and allows them time to put a plan in place to recover the debts.

 

When does this come into effect?

This came into effect at the beginning of May, however, any debts prior to this debt can qualify for ‘Breathing Space’.

 

Where does the scheme apply

The scheme is for individuals who live in England and Wales.

 

How does this affect serving notice?

Serving a Section 8 notice must now include details of the Breathing Space scheme – any section 8 notices issued with an out-of-date form will be invalid. If you are a landlord/letting agent who is then contacted by a debt advice provider you must follow the Breathing Space Moratorium.

 

Is Breathing Space a payment holiday?

A Breathing Space is not a payment holiday and a person will still be liable for things such as rent or mortgage payments (not including arrears accumulated prior to breathing space). If a debtor does not pay any ongoing liabilities the debt adviser may cancel the Breathing Space. 

 

What are the two types of Breathing Space?

One type of Breathing Space is to provide protection against rising fees, by pausing enforcement action, freezing charges, and interest to help the person get back on track and avoid escalating debts, the debt advisor will also work with them to set up a payment plan. The other type of Breathing Space is for people receiving mental health crisis treatment. This has higher protections and will last for as long as the mental health crisis treatment is in place, plus 30 days.

 

How can the scheme be accessed?

A ‘Breathing Space’ can only be accessed once every 12 months, however, there is no limit to how many times a person can access the mental health crisis ‘Breathing Space’ moratorium. It is only accessible by the person experiencing the debts or an approved mental health professional if there is mental health crisis treatment taking place and cannot be applied for by a landlord on behalf of a tenant, for example.

 

What debts can apply to Breathing Space?

Most debts should qualify for this, for example, debts such as credit cards, overdrafts, rent arrears, mortgage arrears, and utility bills would all qualify.

 

Who can start a breathing space?

‘Breathing Space’ can only be started by a debt advice provider who is authorised by the Financial Conduct Authority (FCA) to offer debt counselling or a local authority (where they provide debt advice to residents).

 

How can someone apply?

Advice should be sought from an approved debt advice provider and therefore when creditors are notified they must pause enforcement action, freeze charges/fees/interest and stop contact for the duration of the ‘Breathing Space’.

 

If you are a landlord or tenant looking for more information regarding ‘Breathing Space’ please contact us for more information.

 

Further information and full guidance can also be found below:

https://www.gov.uk/government/publications/debt-respite-scheme-breathing-space-guidance