What is the Debt Respite Scheme (Breathing Space)?

Who is eligible for Breathing Space and what debts qualify? Michael Chamberlain, Director at Chamberlain & Co, explains what you need to know about the Debt Respite Scheme, otherwise known as ‘Breathing Space’.

Debt Respite Scheme Breathing Space

What is the Debt Respite Scheme (Breathing Space)?

The Debt Respite Scheme (Breathing Space), commonly referred to as ‘Breathing Space’, was introduced under The Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020.

Breathing Space is a scheme designed to provide individuals with the time they need to seek advice on their financial affairs to ensure they have the best opportunity to resolve these liabilities.

There are two types of Breathing Space scheme:

  • a standard breathing space
  • a mental health crisis breathing space

Who is eligible for Breathing Space?

To qualify for the standard breathing space scheme, you must not have entered into a scheme within the last year and have at least one qualifying debt. Most debts are likely to be qualifying debts and some examples are:

  • credit/store cards
  • loans (including pay day loans)
  • overdrafts
  • arrears on utility bills
  • mortgage or rent arrears

To access the scheme, you will need to meet with a debt advisor who will assist you in entering into the scheme.

The criteria for a mental health crisis breathing space scheme are the same as the above, but you must also be receiving mental health treatment, and evidence from an Approved Medical Health Professional must be provided to your debt advisor.

Currently these schemes are in operation in England and Wales. You must therefore live, or usually reside, in England or Wales to qualify. You must also not have a debt relief order (DRO) or individual voluntary arrangement (IVA) in place, or be an undischarged bankrupt.

Which debts do not qualify for Breathing Space?

The following debts are excluded from Breathing Space schemes:

  • Secured debts, such as mortgages or hire purchase agreements, are limited to any arrears in the debts that exist when you apply for Breathing Space. Any amounts which will only become due after the application are not protected by the scheme.
  • Debts you have incurred due to fraudulent activities.
  • Any fines or debts that have been issued to you by a court for an offence. These include any interest due on these debts but do not include penalty charge notices, such as a parking ticket.
  • Any obligations you have arising from a confiscation order.
  • Child maintenance or similar obligations you are obliged to pay following a decision made in family court proceedings.
  • Crisis or budgeting loan you have received from the social fund.
  • Student loans.
  • Damages awarded against you for causing the death of, or personal injury to, someone else.
  • Advance payments of Universal Credit.
  • Council tax liabilities that have not yet fallen due.

How do you apply for Breathing Space?

If you are eligible to apply for Breathing Space, you should approach a debt advisor.

Debt advisors must be authorised by the Financial Conduct Authority (FCA) to provide debt counselling or be employed by a local authority who provides debt advice to their residents. The debt advisor will make the application for you. It is important to note that the debt advisor must not charge you for this service.

The debt advisor will undertake a fact-finding process with you, to identify the necessary information required for the application, such as the nature of your debts, information needed to identify your accounts, such as account numbers, and other similar information.

After undertaking the fact-finding process, the debt advisor will need to satisfy themselves that you cannot, or are unlikely to be able to, repay all of some of your debt, and that a Breathing Space is appropriate for you.

What happens during Breathing Space?

Once you have entered the standard Breathing Space scheme, the scheme will normally last for a period 60 days, with your advisor undertaking a mid-point review, usually between day 25 and day 35 of the scheme.

For a mental health breathing scheme, this period will last for as long as you are receiving treatment, plus an additional 30 days after treatment has ended, although ongoing treatment must be confirmed every 20 to 30 days.

Your details will be placed onto the Breathing Space register, although your address details can be withheld if there is a risk of violence to you and the occupiers of your usual residential address.

Your known creditors will be notified and this will pause the majority of enforcement actions against you. Your creditors must not:

  • charge you interest, fees, and penalties during the breathing space
  • send an enforcement or recovery agent to recover a debt, and must pause further action any already instructed
  • contact you regarding your debt without permission of the court

You should continue to pay ongoing liabilities, such as utility bills or your mortgage, as if you fail to do this your advisor may cancel your standard breathing space (although this does not apply to mental health breathing space).

A standard breathing space cannot be cancelled or withdrawn by you after it has commenced.

What happens after Breathing Space?

When the breathing space ends, creditors may:

  • start applying fees interest and penalties
  • take action to enforce their debt, such as instruct enforcement or debt collection agents to attend at your premises
  • start or resume legal proceedings against you

It is therefore important you utilise your breathing space to seek advice on your affairs so that you can arrange a resolution of your affairs whether by means of informal negotiations with your creditors or, where this is in your best interests and potentially also to the benefit of creditors, by means of formal insolvency proceedings.

About the author

Michael Chamberlain is Director at Chamberlain & Co, licensed insolvency practitioners and business recovery specialists committed to saving businesses and jobs wherever possible. Michael is a fellow member of ICAEW with over 30 years of experience advising lenders, corporates, distressed investors and individuals in complex financial restructuring and recovery situations across a broad range of industry sectors and jurisdictions.

See also

What you need to know about Corporate Insolvency and Governance Act 2020

The UK Restructuring Plan: an overview

Monthly UK insolvency statistics - October 2021

UK individual insolvency statistics - Q3 2021

Find out more

The Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 (Legislation)

Debt Respite Scheme (Breathing Space) guidance for creditors (GOV.UK)

Image: Getty Images

Publication date: 7 February 2022

Any opinion expressed in this article is that of the author and the author alone, and does not necessarily represent that of The Gazette.