What the Debt Respite Scheme (Breathing Space) Will Mean for Clients
February 15, 2021
Category: News
With the breathing space scheme for people in problem debt set to launch in May, we thought we’d highlight what our clients can expect once they have instructed us to enforce a debt and then receive notification of a breathing space.
The information below is a brief summary taken from government guidance. The full guidance for creditors can be found here.
Standard and Mental Health Crisis Breathing Space Definitions
A standard breathing space gives people with problem debt legal protections from creditor action for up to 60 days – this includes pausing the majority of enforcement action, contact from creditors and freezing interest and charges on debts.
A mental health crisis breathing space has some stronger protections and is only available to someone who is receiving mental health crisis treatment, lasting as long as the person’s mental health crisis treatment plus 30 days – no matter how long the crisis treatment lasts.
High Court Enforcement Action
Once a breathing space has started, all enforcement action against the debtor, or anyone who is jointly liable with them for a breathing space debt, must stop. If you have instructed us to enforce a debt and you receive a notification that the debt is in a breathing space, you must inform us of the breathing space as soon as possible.
During a Breathing Space, we can’t:
- Collect or enforce a breathing space debt
- Give notice about collecting or enforcing the debt
- Attempt to enforce a judgment or order issued by a court or tribunal, before or during the breathing space, without the court’s permission
- Obtain a warrant or writ
- Visit the debtor’s home or business to take their goods
- Sell or take control of the debtor’s property or goods. If we have taken control of any goods by removing them and securing them elsewhere before a breathing space started, the goods may be sold during the breathing space and the costs of the sale deducted from the proceeds. However, fees accrued during the breathing space for storage of those goods cannot be charged either during the breathing space, or after it ends
- Serve a notice to take possession of a property let to the debtor on the grounds of rent arrears due up to the start of the breathing space; or take possession of a property let to the debtor having served such a notice prior to the start of the breathing space
- Contact the debtor about the enforcement of a breathing space debt
Court orders and judgments for a breathing space debt, which were made before the breathing space began, cannot be enforced until the breathing space ends. This is unless the court or tribunal gives permission for these actions to continue. If a time limit for enforcement related to the debt ran out during the breathing space, this is extended to 8 weeks after it ends.
HCEO Contact with Debtors During a Breathing Space
During a breathing space, we must not contact a debtor about any collection or enforcement action for a breathing space debt – this includes asking them to pay. We can only contact the debtor to respond to a query or complaint the debtor sent us, if the debtor asks us to talk about the breathing space debt, or about any action the court or tribunal have allowed.
Receiving Payments During a Breathing Space
A breathing space is not a payment holiday. While we cannot enforce a breathing space debt during a breathing space or charge interest or fees on it, a debtor is still legally required to pay their debts and liabilities. During the Breathing Space, the debtor should continue to pay any debts and liabilities they owe. We can continue to accept payments.
If there is a controlled goods agreement in place on a qualifying debt and we have agreed a repayment plan with the debtor, the debtor should continue to make payments under that agreement as they fall due. After the scheme time limit expires, any unpaid instalments may be treated as a breach of the repayment plan.
When a Breathing Space Ends
Once a breathing space period ends, we can:
- Start applying interest, fees, penalties and charges to the debt from the date the breathing space ends. We cannot backdate or apply any interest, fees, penalties or charges that accrued or would have accrued during the breathing space period – unless a court allows us to do this
- Take any action to enforce the debt, including contacting the debtor
If you have any questions regarding this upcoming change, please get in touch with the Andrew Wilson & Co. team on 0161 925 1800.
