A new free service officially known as the Debt Respite Scheme or Breathing Space Scheme was launched by the government on 4th May 2021. The purpose of the scheme is to help people in England and Wales who are struggling with their debts, get that a little bit of extra time to get back on track, without the additional pressure from creditors and debts piling up.
Under the scheme you will have protection from creditors for up to 60 days, with interest and penalty charges frozen and enforcement action paused.
This gives you the time to seek professional debt advice and figure out your options for dealing with your debts. There are some eligibility checks involved, before you can apply.
How does it work?
Firstly you must seek advice from a Debt Advice Provider who is authorised by the Financial Conduct Authority (FCA), such as ourselves. They will be able to assess if you are eligible for the Breathing Space Scheme, and if you choose to apply, they can submit your application to the Insolvency Service.
Am I eligible for Breathing Space?
In order to qualify for the scheme you must:
- Owe at least 1 qualifying debt to a creditor
- Be deemed unable or unlikely to repay all or some of your debt
- Reside in England and Wales
- Not be in another Insolvency Solution such as a DRO (Debt Relief Order), IVA (Individual Voluntary Arrangement), Interim Order, or Bankruptcy, at the time of application.
- Not have had “Breathing Space” in the last 12 months, at the time of application.
What debts must I have to qualify?
Debts included in a Breathing Space can be of any amount and must be one or more of the below.
- Credit Cards
- Store Cards
- Personal Loans
- Payday Loans
- Overdrafts
- Utility Bill Arrears
- Mortgage or Rent Arrears
- Government Debts such as Tax and Benefit debts (with some exceptions outlined below)
- Joint Debts ( even if only one applicant for Breathing Space)
- Guarantor Loans (However, Your protections do not extend to the Guarantor)
- Some Business Debts (with exceptions outlined below)
What debts do not qualify?
- Secured debts, such as a mortgage or HP agreement
- Fraudulent Debts
- Fines or Penalties imposed by a court for an offence
- Confiscation Order obligations
- Child maintenance or obligations under an order made in family court proceedings
- Crisis or budgeting loans from the social fund
- Student loans
- Damages you need to pay for death or personal injury caused to someone else
- Advance payments of Universal Credit
- Council tax liabilities that have not yet fallen due. If all instalments for that financial year have fallen due and have not been paid, these are considered to be a qualifying debt. If you have been served with a ‘reminder notice’ to pay a council tax bill, the remaining liability for the financial year is a qualifying debt
- While some business debts qualify for the breathing space, they do not qualify if the debt only relates to the business (not you personally) and you are VAT registered, or a partner in a business with someone else.
What happens after my Breathing Space is approved?
When your application is submitted, it will begin the day after your details are placed on the Breathing Space Register, which normally takes about 2 working days.
For the first 20 days your creditors can try and challenge the application and any debts included in it.
You can add more debts to your Breathing Space if need be, providing the debt existed before your application was made. They will then be covered for the remainder of the 60 days along with your other debt/debts. Any debts incurred after your Breathing Space started cannot be included.
After 25-35 days into your Breathing Space, the debt advisor that submitted your application must contact you for a review.
During the 60 days Breathing Space you will have the time to consider how you are going to deal with your debts, and then take the necessary steps to get any solutions put in place, ready for when the Breathing Space finishes.
For more information on The Breathing Space Scheme, or if you are struggling with your debts, please get in touch.