Breathing Space: Understanding the Debt Respite Scheme
Financial struggles can be overwhelming, but the UK government has introduced a lifeline for those drowning in debt. The Debt Respite Scheme, commonly known as “breathing space,” offers a crucial pause in the relentless cycle of creditor demands. Let’s explore how this initiative can provide much-needed relief and a path towards financial stability.
What is breathing space and how does it work?
Breathing space, officially known as the Debt Respite Scheme, is a government initiative in England and Wales designed to provide temporary relief for individuals grappling with problem debt. This scheme offers two types of protection:
- Standard breathing space: Provides 60 days of protection from most creditor action
- Mental health crisis breathing space: Lasts for the duration of mental health crisis treatment plus 30 days
During a breathing space period, creditors must halt enforcement action, freeze interest and charges on qualifying debts, and suspend any court proceedings related to the debts. This respite allows you to seek professional advice and explore appropriate long-term solutions for your financial situation without the added pressure of constant collection attempts.
To be eligible for standard breathing space, you must reside in England or Wales, have qualifying debts, be unable to pay your debts, and not be in an existing debt solution. Additionally, you can’t have used breathing space in the last 12 months.
Eligibility for breathing space
To qualify for breathing space debt relief, you need to meet several key criteria:
- Live in England or Wales
- Have qualifying debts owed to creditors
- Be unable to pay your debts
- Not be in an existing debt solution (e.g., bankruptcy or an Individual Voluntary Arrangement)
- Not have used breathing space in the past 12 months
There are two types of breathing space available:
- Standard breathing space: Offers 60 days of protection from creditor action for individuals with problem debt
- Mental health breathing space: Provides protection for the duration of mental health crisis treatment plus an additional 30 days
For mental health breathing space, you must be receiving mental health crisis treatment and have certification from an Approved Mental Health Professional. Unlike standard breathing space, you don’t need to receive debt advice first to apply for mental health crisis breathing space.
A debt adviser will assess your situation to determine if breathing space is appropriate. They’ll consider factors such as whether you need time to receive debt advice, if you’re likely to enter a debt solution, and if breathing space is the most suitable option for addressing your financial difficulties.
How to apply for breathing space
To apply for breathing space, you need to contact a debt advice provider authorised by the Financial Conduct Authority. Here’s the process:
- Consult a debt adviser about your financial situation.
- If eligible, prepare your application with the adviser’s assistance. You’ll need to provide:
- Your full name
- Date of birth
- Usual residential address
- Details of your debts and creditors
- The debt adviser will submit your application through the breathing space portal.
- Your details will be added to the breathing space register.
- The Insolvency Service will notify your creditors of your breathing space status.
Remember, you can’t apply for breathing space online directly – it must be done through an approved debt advice provider. The application process is free of charge.
The impact of breathing space on debts and creditors
The breathing space moratorium significantly affects both debtors and creditors. For you as a debtor, it provides crucial relief from creditor pressure, while creditors must pause most collection and enforcement activities.
Key impacts on debts include:
- Freezing of interest, fees, and charges on qualifying debts
- Prevention of new interest or charges during the breathing space
- The underlying debt remains and is not written off
Creditors must stop all enforcement action on qualifying debts, pause ongoing court proceedings, and cease direct contact with you about debt repayment.
Many people ask, “Does breathing space stop bailiffs?” The answer is yes – bailiffs and enforcement agents must cease all action during the moratorium, including visiting your home or business, taking control of goods, or selling your possessions.
Regarding credit scores, while being in breathing space itself isn’t reported to credit reference agencies, any missed payments during this time will still be recorded as normal. This means your credit score could still be negatively impacted if you don’t maintain payments where possible.
Responsibilities during breathing space
During a breathing space period, both debtors and creditors have important responsibilities. As a debtor, you should:
- Continue paying ongoing liabilities where possible (e.g., mortgage, rent, utilities)
- Avoid taking on additional borrowing over £500
- Engage with your debt adviser and attend scheduled appointments
- Inform your adviser of any significant changes in circumstances
Creditors must comply with breathing space regulations by:
- Pausing enforcement action and debt collection contact
- Freezing interest, fees, and charges on qualifying debts
- Suspending any court action related to the debts
- Searching their records to identify all of your qualifying debts
- Informing any agents or third parties to stop enforcement action
By fulfilling these responsibilities, all parties contribute to the effective implementation of the breathing space scheme in the UK, providing you with the opportunity to seek advice and find appropriate long-term debt solutions.
Taking the first step towards financial recovery
The Debt Respite Scheme offers a valuable opportunity to regain control of your finances. By providing a pause in creditor action, it creates space for you to assess your situation and explore sustainable solutions. Remember, breathing space is not a permanent fix, but rather a tool to help you navigate towards long-term financial stability. If you’re struggling with debt, don’t hesitate to reach out to a qualified debt adviser to discuss whether breathing space could be the right step for you. Your journey to financial recovery can begin today.
