From May 4th 2021 new legislation will be brought into place to allow approved debt advisers to give clients (who qualify) legal protection from their creditors. The Breathing Space scheme provides individuals who are struggling, or about to struggle to repay their debts, time to seek professional debt advice and find an appropriate long term solution without creditors being able to take enforcement or legal action whilst they do this.
There are two types of breathing space which an individual may qualify for.
the different types of Breathing Spaces?
- Standard Breathing Space
- Mental Health Crisis Breathing Space
Breathing space lasts for up to 60 days. Once effective, a creditor must stop
all action relating to that debt and apply the protections. If a creditor has
commenced legal proceedings, either in-house or instructed solicitors, these
must be put on hold including enforcement action.
How do you
qualify for Standard Breathing Space:
- An individual living in England or Wales (includes
- Owe a qualifying debt to a creditor
- Not have a debt relief order or an individual
voluntary arrangement, or be an undischarged bankrupt
- Not already had a breathing space in the previous
Breathing Space affect your Credit Rating?
There is no official notice placed on your credit
file, however if you do not maintain payments to each of your creditors
throughout the breathing space period, although they cannot chase you, enforce
the debt or add interest and charges during that time, it may still be treated
as a breach of your repayment plan meaning any missed instalments can be noted
on your credit file. The
equivalent of 3 or more missed payments can mean that creditors can issue you
with a default notice. Click here for more information on default notices
the details of your Breathing Space be entered onto a searchable register?
Breathing Space is not held on a public searchable register. There is an electronic
system through the Insolvency Service where your Breathing Space will
registered, however only those authorised to do so, have access to it. The
register is used to input your details so your creditors can be notified and
for authorised debt advisers to carry out searches for any previous Breathing
Spaces to ensure you haven’t had one in the previous 12 months (not applicable
for the Mental Health Crisis Breathing Space).
Apply for Breathing Space
can apply to a debt advice provider who is authorised by the Financial Conduct
Authority (FCA) to offer debt counselling or a local authority that provides
debt advice to its residents. .
advisor would then do an assessment of your financial situation and decide
whether or not a Standard Breathing Space is appropriate. As well as the
qualifying factors above the adviser will also consider if:
client cannot, or is unlikely to be able to, repay all or some of their debt
breathing space is appropriate for their client
Health Crisis Breathing Space
health crisis breathing space, lasts as long as the treatment continues, plus
30 days. An approved mental health professional (AMHP) must certify that a
person is receiving mental health crisis treatment, this can then be used by an
approved debt advice provider to start a mental health crisis breathing space. The
individual must still meet the same criteria as for the standard breathing
moratorium, although there is no limit on how many mental health breathing
spaces you can have in any length of time.
How to Apply for Mental Health Crisis
The same as the Standard Breathing space, your application must go through a Debt Advice provider (authorised by the FCA to give debt counselling) or a local authority that provides debt advice to its residents.
the standard Breathing Space the application does not need to be made by the
individual and can be done on their behalf by their carer, social worker,
mental health nurse and others.
are the Qualifying Debts?
included in a breathing space must be qualifying debts. Most debts are likely
to be qualifying debts. These will include:
- credit cards
- store cards
- personal loans
- pay day loans
- utility bill arrears
- mortgage or rent arrears
debts like tax and benefit debts are all likely to qualify, unless they are included
in the list of excluded debts.
debts can be included in a breathing space, even if only one person applies for
a breathing space. Both individuals who are liable for the debt are protected
by the breathing space.
guarantor loans can be included in a breathing space, the protections do not
extend to the guarantor. The guarantor can apply for their own breathing space,
if they’re eligible.
debts can include any that the individual had before the Breathing Space
legislation came into force on 4 May 2021.
debts incurred during a breathing space are not qualifying debts. Neither are
new arrears on a secured debt that arises during a breathing space.
personal debts and liabilities are qualifying debts, except for:
- secured debts (like mortgages, hire purchase or
conditional sale agreements). You can only include arrears on these debts that
exist at the date of an application for a breathing space.
- debts incurred from fraud or fraudulent breach of
- liabilities to pay fines imposed by a court for an
offence. This includes any interest on the fine and any penalties connected to
it. This does not include penalty charge notices, like a parking ticket
- obligations from a confiscation order
- child maintenance or obligations under an order
made in family court proceedings
- a crisis or budgeting loan from the social fund
- student loans
- damages to pay for death or personal injury caused
to someone else
- advance payments of Universal Credit
- council tax liabilities 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 a debtor has been served with
a ‘reminder notice’ to pay a council tax bill, the remaining liability for the
financial year is a qualifying debt
some business debts also qualify for the breathing space, they do not qualify
if the debt only relates to the business (not the individual personally) and
the applicant is VAT registered, or a partner in a business with someone else.
eligible non-domestic rates debt (or business rates) is a qualifying debt if
all instalments for that financial year have fallen due and have not been paid.
If the individual has been served with a ‘further notice’, the remaining
liability for that financial year is a qualifying debt.
responsibility throughout the Standard Breathing Space
must, to the best of your abilities maintain all ongoing liabilities. These
include mortgage/rent, council tax (if not included as a liability in the
Breathing Space), utilities such as water, gas and electricity. Any liabilities
that have been included in the Breathing Space, that fall due are not ongoing
liabilities that must be paid. Failure to keep up with ongoing liabilities, if
you have the resources to do so, may result in your breathing space being
must be in regular contact with the adviser. It is a requirement of the
Standard Breathing Space moratorium that you remain in contact with the adviser
and complete a midway review between day 25-35 of the breathing space
space is not a payment holiday. Although creditors cannot take any action to
enforce the debt you are still legally liable for the debts throughout the
breathing space. Although it is not a requirement of the breathing space if you
can maintain payments towards the debts included in the breathing space you
still can. Interest and charges cannot be added to the debt during the
breathing space or backdated after the breathing space ends, however any unpaid
instalments may be treated as a breach of the repayment plan.
can I go for help with Standard or Mental Health Crisis Breathing Space?
breathing space can only be started by:
- a debt advice provider who is authorised by the
Financial Conduct Authority (FCA) to offer debt counselling
- a local authority (where they provide debt advice
advice providers are responsible for the administration of a breathing space.
They are the point of contact for the debtor, their creditors (and appointed
agents), and the Insolvency Service.
The Debt Advisor and Breathing Space
Debt Advisor team have undergone thorough training and are in a position to
advise and offer a Standard Breathing Space or Mental Health Crisis Breathing
Space for those that qualify.
do not hesitate to contact one of our trained and friendly advisors on 0800 085
1825 for more information.