All you need to know about breathing space

By Aaron Sambells, Senior Debt Recovery Specialist at Woodstock Legal Services

What is breathing space?

The Debt Respite Scheme, or breathing space, aims to help relieve some of the pressure of dealing with creditors, so debtors can focus on getting debt advice and setting up a debt solution without worrying about being chased for payment or incurring extra charges.

It’s a free scheme, launched by the Government on 4 May 2021.

If debtors pass the eligibility checks, creditors won’t be able to add interest or fees to debts, or take enforcement action, for 60 days. Debtors still need to keep making their regular payments if they can afford to.

How debtors apply for breathing space

To be eligible for standard breathing space debtors need to meet the following criteria:

• need to live in England or Wales; and
• must be unable to repay some or all of their debts; and
• must not be in a DRO (Debt relief order), IVA or be an undischarged bankrupt; and
• must not have had breathing space in the last 12 months.

A specialist adviser will discuss the debtors circumstances with them to help them find a suitable way for them to begin sorting out their finances. They can apply for breathing space on the debtors behalf if it’s right for them. But depending on their circumstances they might recommend a different approach, such as:

• a debt solution, like a debt management plan, a Debt Relief Order or an IVA;
• negotiating directly with their creditors;
• making some changes to their budget.

What happens when debtors apply for breathing space?

Once a debtor is in breathing space, all creditors who have been included will be informed and they must stop any collection or enforcement activity.

Breathing space will last for 60 days if they remain eligible. Once the breathing space ends, creditors will be able to collect the debt in the usual way.

During breathing space, debtors will need to try and decide on the best solution to deal with their debts. To do this they will need to work out what payments they can afford to pay their debts.

Which debts can be included in breathing space?

Most personal debts can be included. That includes things like overdrafts, credit cards and loans. But it also includes some types of debt that often can’t be included in other debt solutions. For example, council tax arrears and rent arrears can both be included (see the below debts that can be included). 

• rent arrears;
• mortgage arrears;
• gas and electricity arrears;
• water arrears;
• hire purchase arrears;
• council tax and business rates arrears; and
• income tax and National Insurance arrears

Also, all non-priority debts can be included. Examples of debts that can include are:

• mobile phone arrears;
• credit cards and store cards;
• bank overdrafts and bank loans;
• loans to finance companies;
• catalogues;
• home-collected credit;
• family or personal debts; and
• mortgage shortfalls (money you owe if your house was sold for less than the outstanding mortgage).

In conclusion

• Creditors cannot add interest or charges to an eligible debt during breathing space.
• Creditors or a collection agency cannot contact debtors to ask for payment towards a debt that has been included in breathing space.
• No enforcement action can be taken against debtors for a debt that has been included in breathing space.