Getting a little Breathing Space from your Debt
The Debt Respite Scheme is the official name for Breathing Space, a government programme that grants those individuals in debt a break from the stress of missed payments and a chance to catch up financially. If you’re struggling to pay off your debts, then you might qualify for the scheme.
What is the Breathing Space Scheme?
Breathing Space is a form of temporary protection established in England and Wales in May 2021, to give those in debt a chance to get advice and support to establish payment plans. This temporary protection can freeze interest, fees and charges, and halt action and contact from creditors or their representatives.
There are two types of Breathing Space available and the time the protection lasts depends on which version of the scheme you have qualified for. The first is a Standard Breathing Space, which grants you up to 60 days of relief with a review towards the end of the first month. The second is a Mental Health Crisis Breathing Space, which lasts for the duration of your mental health treatment plus 30 days. Both versions of the scheme need to be applied for through debt relief organisations such as The National Debtline, but a Mental Health Crisis Breathing Room is specifically for people in mental health treatment and will require an Approved Mental Health Practitioner to confirm you are receiving emergency, acute care, or specialist mental health treatment.
Being in a Breathing Space scheme is different to being in a Payment Holiday. In a Payment Holiday, you do not have to make payments towards your debt, but interest rates will continue to compound, and fees will be added on. You will also have to pay your arrears after the Payment Holiday has ended. Breathing Space requires you to make your payments (which is why it’s important to seek advice from a debt advisor to establish a payment plan).
What qualifies?
You will need to apply for a Breathing Space through a qualified debt advisor, who will decide whether you need the time and are likely to enter a debt solution. You must also live in England or Wales. If you’re in Scotland you can apply for a Statutory Moratorium, which although comparable, is not the same as the Breathing Space Scheme. There is then a list of eligibility requirements you must meet:
- You have not had a Breathing Space period in the last 12 months.
- You are not subject to an interim order
- You are not on a Debt Relief Order (DRO)
- You do not have an individual voluntary arrangement (IVA)
- You are not undischarged bankrupt
Not all debt qualifies for Breathing Space, so even if you meet these criteria, you still may not benefit from the scheme.
| Qualifying Debt | Non-Qualifying Debts |
| Credit cards and store cards | Child Maintenance or Child Support payments or arrears |
| Personal loans | Court fines or arrears |
| Payday loans | Student Loan debt |
| Overdrafts | Crisis Loans |
| Mortgage arrears / Rent debts | Criminal confiscation order arrears |
| Council tax arrears | Universal Credit advances |
| Tax, National Insurance and Benefit debts | Debts incurred by Personal Injury claims made against you |
| Water, Gas and Electricity debts | Debts incurred because of fraud |
Joint debts also qualify for Breathing Space, (such as a joint mortgage), even if only one person needs to apply for the scheme. Guarantor loans qualify, but the Guarantor isn’t covered by the scheme.
Whether business debts qualify can be complicated. Commercial mortgage and rent arrears can be included in a Breathing Space, but business debt isn’t eligible if you’re registered for VAT, in a partnership, or the debt relates solely to the business. It’s best to talk to a qualified debt advisor to work out if you’re eligible, particularly if you’re self-employed.
How do I apply?
If you think you fit the criteria to apply for the scheme, then get in contact with a qualified debt advisor. You’ll need a complete inventory of all your debts, and to apply you’ll need consent from anyone you have a joint debt with. The advisor will be able to tell you if you qualify, and help you make a plan – whether you qualify or not.
Once you and your advisor have decided that the Breathing Space Scheme is right for you, you will need to submit an application to the Insolvency Service. They will register your details on a private register (only your advisor and your creditor will be able to see your details) by the end of the next working day, and your protection will start the day after registration.
It’s important to note that during the first twenty days of your application, your creditors can contest your Breathing Space application.
If you need to you can add debts to the scheme once it has started but only if they were incurred before the Breathing Space began. You’ll also only receive protection from them for the duration of the existing scheme – if you add debts into the scheme on day twenty, you’ll only receive forty days of protection.
If you’d like to apply to the Mental Health Crisis Breathing Space Scheme, you can have your Approved Mental Health Professional, your carer, a mental health nurse or a social worker apply for you. You can apply if you’ve been on the Standard Breathing Space scheme within the last 12 months and the number of times you can apply for the Mental Health Crisis Breathing Space is unlimited.
What happens during my Breathing Space?
A standard Breathing Space gives you time to get advice and find solutions to your debts, so you should engage in this process. Around halfway through your Breathing Space, your advisor will review your position to ensure you’re continuing to meet the conditions. You need to inform your advisor if there’s been any change in your circumstances, keep paying your bills and debts not covered by the Breathing Space and not borrow any extra money exceeding £500, including any overdrafts. If you fail to comply your advisor may cancel the scheme.
The Mental Health Crisis Breathing Space scheme is different in that it does not require you to seek advice or find a way to get yourself out of debt. It’s designed to give you the room to get better. You or your representative will still need to be in communication with your advisor. If they stop hearing about your treatment, they can cancel the Breathing Space at their discretion.
If you miss payments whilst on the scheme, your creditors can still report this to credit reference agencies, but they cannot inform them that you are on the scheme.
A creditor cannot engage bailiff action against you and bailiffs cannot take control of your goods whilst you’re in the scheme. They are allowed to sell anything they took before the scheme started, but they can’t charge you storage fees whilst you are in the scheme or after it.
Your creditors can’t take you to court, start the bankruptcy process, or issue you with statutory demand whilst you’re in the scheme. If court action has already been taken against you those creditors will be unable to recover money from you or appoint bailiffs to do so. They can, however, get an attachment of earning to make money from your wages.
What happens after the Breathing Space?
Once the Breathing Space has ended your creditors can start adding interest, fees and penalties to your debts, take action to enforce them and start or resume legal proceedings. That’s why it’s so important to work with your advisor to find a long-term solution.
Brett’s Business Recovery has support and advice for those looking to regain control of their finances, whether that be through personal debt or for those needing help to turn their business around. Get in touch today and let us take some of the weight off.