Debt Respite Scheme

by Patrick Garratt - 31st January 2021

The Debt Respite Scheme (Breathing Space) will come into force in England and Wales from 4 May 2021.

The scheme is designed to give those in financial distress or suffering from ill metal health breathing space from their debts.

“The Debt Respite Scheme (Breathing Space) will give someone in problem debt the right to legal protections from creditor action.”(Government guidance)

There are two types of respite available, ‘standard breathing space’ and ‘mental health crisis breathing space’; both have different eligibility criteria.

Standard breathing space

“A standard breathing space is available to any client with problem debt. It gives them legal protections from creditor action for up to 60 days. The protections include pausing most enforcement action and contact from creditors and freezing most interest and charges on their debts.”

To obtain standard breathing space, an individual must apply to a debt advice service (who is FCA regulated) for a breathing space moratorium. The adviser will consider the application and will initiate the moratorium if they believe that the individual meets the criteria, the most pertinent being that “the debtor is unable, or is unlikely to be able, to repay some or all of their debt as it falls due”.

If the applicant is in a position to pay off  the money they owe through proper budgeting or selling assets, then a Breathing Space is not likely to be deemed the right solution.

Mental health crisis breathing space

A mental health crisis breathing space is only available to an individual who is receiving mental health crisis treatment. If an Approved Mental Health Professional (AMHP) certifies an individual is in mental health crisis treatment, they or someone else may apply for a mental health crisis breathing space on their behalf.

The mental health crisis breathing space has some stronger protections than the standard breathing space. It lasts as long as the individual’s mental health crisis treatment, plus 30 days (no matter how long the crisis treatment lasts).”

What does this mean for landlords?

Once a landlord or their agent receives a notice that their tenant is has been granted breathing space, they must not take any of the below actions until the end of the breathing space.

• Contact the tenant directly in relation to the debt
• Obtain a warrant in relation to the debt
• Serve a notice seeking possession because of the debt
• Sell on the debt to a third party
• Charge interest on the debt over the period covered by the breathing space
• Apply for a judgement in relation to the debt
• Enforce an existing money judgement for the debt
• Take control of the tenant’s belongings during the breathing space
• Request third party deductions from Universal Credit or other benefits
• Start bankruptcy proceedings

Importantly, this does not apply to guarantors, unless they too are granted breathing space by an FCA regulated debt advisor.

Landlords and agents can continue to talk to tenants about anything not related to the debt, and if they contact you to discuss the debt you can answer their questions.