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22 March 2023

Debt Awareness Week 2023: the Debt Respite Scheme

4 mins

As the cost of living crisis continues, with no apparent end in sight for rising energy and food costs, many individuals find themselves struggling with debt.

If you are faced with debt, it is better to try and resolve issues rather than bury your head in the sand, which is only likely to lead to further problems in the future.

Creditors can use a number of methods to seek repayment of the debt owed to them. This could range from letters from solicitors, serving a statutory demand, issuing court proceedings, issuing bankruptcy proceedings, or instructing a county court bailiff or High Court Enforcement Officer to attend your premises and seize goods following a county court judgment against you.

As stated above, it is usually better to try and engage with your creditor to see if a mutually agreeable arrangement can be reached. In most cases, creditors simply want the debt paid. They do not want to make debtors bankrupt as the likelihood is that they would not recover the debt owed to them if the debtor is made bankrupt. As such, creditors may be prepared to wait a period of time to be paid, or be agreeable to some form of security in return for later payment.

Individuals should contact a debt adviser or their solicitors who will be able to advise them of the various options available to them if they have debt problems or are being chased by a creditor for payment of a debt.

One of the options open to debtors is a breathing space moratorium, which were introduced in May 2021 by the Debt Respite Scheme (Breathing Space Moratorium and Mental Health Moratorium) (England and Wales) Regulations 2020 (the Regulations). The Regulations provide debtors in England and Wales with, in most cases, temporary relief from being pursued by their creditors.

Under the scheme, there are two types of breathing space:

  • Standard breathing space: this is available to any debtor with debt issues and provides them with protection from legal action by creditors for up to 60 days
  • Mental health crisis breathing space: this is only available to debtors who are in receipt of mental health crisis treatment, but provides breathing space from debtors for as long as the mental health crisis treatment is continuing, plus an additional 30 days

If a debtor enters the scheme (which they can only do after seeking advice from a debt advisor and/or mental health professional), their creditors are notified by the Insolvency Service, and any actions to pursue the debt should stop until after the breathing space has ended. Such action also includes notifying any agents a creditor may have instructed to enforce the debt that they should also cease any action against the debtor.

It should be highlighted that the Regulations (in all cases except for mental health crisis breathing spaces) only provide a temporary 60-day respite from action by creditors. As such, individuals should use this breathing space time wisely to either seek advice from a debt adviser, engage with the creditor to see if a payment plan can be agreed, or see if any other solution can be reached.

Standard breathing spaces are only available once every 12 months, so if you have already entered into a breathing space in respect of a debt, you cannot enter a new breathing space for a further year. Debtors should also note that the scheme does not cover all debts, and the debt adviser will be able to clarify those that are covered by the scheme.

If you are suffering from a mental health crisis, you may be entitled to a longer moratorium under the Regulations. A suitably qualified medical professional will, however, have to confirm that you are suffering from a mental health crisis and the situation will remain under review. If the professional later believes that you are no longer suffering from the mental health crisis, the moratorium will come to an end.

Debtors should be aware that creditors are becoming wiser to the scheme and will seek to challenge debtors as to their suitability for a mental health crisis breathing space, if they feel that the debtors are using the Regulations to avoid payment, when in fact they are not suffering from a mental health crisis.

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