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Breathing Space for those with problem debts

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Breathing Space protects debtors from any action taken by creditors for up to 60 days, a welcomed reform for those who are struggling to manage their debts as they will be able to seek much needed advice without facing increased interest and charges as a result. It also protects debtors from enforcement action.

There are extra protections for those individuals who are receiving mental health crisis treatment. The protections will last as long as the person's mental health crisis treatment plus 30 days.

When does this commence?

The scheme will launch on 04 May 2021.

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

The debt advice provider will be responsible for the administration of Breathing Space and will be the main point of contact for debtors and their creditors.

Who will be eligible?

Individuals are eligible if they are assessed by a debt adviser as being in problem debt and they have not used the scheme within the last 12 months. The debt must be a “qualifying” debt as set out in the Debt Respite Scheme (Breathing Space) guidance for creditors published on Gov.UK.

The debt adviser might decide that Breathing Space is not appropriate for someone who can enter a more suitable debt solution straight away, without needing the protections. If the debtor can access funds or sell assets easily to clear the debt, Breathing Space would not be the right solution.

What does this mean for creditors?

If you are told that the debtor is in a Breathing Space, you must stop all action related to that debt and apply the protections. These protections must stay in place until the Breathing Space ends. The electronic service will send you a notification.

Breathing Space is likely to have a huge impact on cash flow particularly in respect of large debts. However, Breathing Space is not a payment holiday and you are still entitled to accept payments.

Breathing Space seeks to protect those who are most vulnerable by giving them the encouragement and headspace to seek professional advice. This will hopefully lead to an increased percentage of repayment to creditors. Allowing debtors to seek advice at an early stage could prevent the pool of creditors from growing and the pot of money to potentially recover from becoming ever smaller.

Need further assistance?

For further advice please contact our debt recovery specialists in the Commercial Litigation Team on 01562 820181.