HCR Law Events

4 May 2021

Government breathing space for personal debts

The Debt Respite Scheme (Breathing Space moratorium and Mental Health Crisis Moratorium) England & Wales) Regulations 2020 come into effect today, giving people with problem debts the right to legal protection from creditors, called a ‘breathing space’.

Two types of breathing space are being introduced; a standard breathing space for up to 60 days and a mental health crisis breathing space, where stronger protections come into force and last for as long as the person’s mental health treatment, plus 30 days.

How does it start?

The debtor must engage with a debt advisor authorised by the Financial Conduct Authority or a local authority, where they provide debt advice to residents. Debt advisors will be responsible for the administration of the breathing space and will be the point of contact for the debtor.

Breathing spaces can only be offered to individuals with problem debts and each case will be examined by the authorised adviser. It is not a given that breathing space will be provided. If a debtor can access funds or has an income, paying debts with budgeting help may be more appropriate.

Will I, as a creditor, be told?

If your debt qualifies, the Insolvency Service will provide you with notification to let you know if a debtor has listed you as a creditor and they have gained a breathing space. They will also provide a notification of when the breathing space has ended or has been cancelled.

What should I do if I am pursuing a debt?

You should suspend (not withdraw) any current action immediately and then for 60 days from the date you receive notification.  Any interest (if IT systems allow) and fees should not be applied during this time (unless the debt is secured).

You may contact the debtor if they request that you do so, and you may continue to collect payments in accordance with an agreed payment plan.

What happens when the breathing space ends?

If alternative arrangements for the payment of the debt are not agreed, you may continue action.

Only one standard breathing space is permitted every 12 months. However, the mental health crisis breathing space can be entered into as many times as the debtor requires if an Approved Mental Health Professional has provided the debt adviser with evidence. 

If you would like further information, such as what debts qualify or any that are excluded, please do not hesitate to get in touch.

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About the Author
Clare Murphy, Partner

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