10 May 2021
Debt Respite Scheme
‘The Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020’ came into force on 4th May 2021. Interestingly, this legislation has been a few years in the making and is not a result of the pandemic. It is designed as another measure to help the public ‘get back on track’ hence why its short name is ‘Breathing Space’.
The legislation gives powers to FCA Regulated debt agencies to agree a Breathing Space moratorium for their qualifying clients directly aimed at those that need time to reorganise their finances prior to either being advised to enter into an IVA or bankruptcy.
The moratorium applies to qualifying debt defined as loans, credit cards, utility bills, mortgage arrears or rental arrears.
There are two Moratoriums that can be applied for;
During the moratorium period, no interest or fees can accrue and no contact can be made with the applicant (which includes emails and telephone calls).
It is important to note that this isn’t something a person can arrange with their creditors and can only be enacted by an approved debt counsellor. The counsellor will be making the decision as to whether the person will be in a position to get back on track with repayments once the respite is over. Also, none of the debt is written off.
- Standard Breathing Space
- -This offers a client a 60 day moratorium from any or all qualifying debts
- -Can only be applied for once in a 12 month period.
- Mental Health Crisis
- -Offers a client a 30 day moratorium from any or all qualifying debts
- -Can be agreed as many times as necessary
- -The client must be under observation by a mental health professional.
Should the debt agencies get this right, these will only be approved for those in most need of help and support at a time they need it most.