In this section:

Government to introduce a Breathing Space Scheme for people struggling with debt 04/02/2021 Labelled as Rent, Finance, Legislation, Tenants

Government have introduced a new debt respite scheme (the Breathing Space Scheme) to give someone in problem debt the right to legal protections from creditors. Almost all kinds of debt can be included in a moratorium on enforcement action, including rent arrears and local authority landlords will need to prepare for the introduction of the scheme in May 2021.


The new statutory Breathing Space Scheme, introducing the breathing space moratorium and mental health crisis moratorium, will commence on 4 May 2021. The Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 which govern the scheme were approved by Parliament in October 2020. The scheme aims to help people in problem debt to better manage their finances, seek professional debt advice and reach sustainable solutions.


The Breathing Space Moratorium will provide protections for people in problem debt by pausing enforcement action from creditors and freezing charges, fees and certain interest on qualifying debts for up to 60 days. There is also an alternative way into the scheme for people receiving mental health crisis treatment. A Mental Health Crisis Moratorium lasts as long as a person's mental health crisis treatment, plus 30 days.


The Breathing Space Moratorium is available to anyone in problem debt who is resident in England or Wales, who accesses debt advice and meets the eligibility criteria and conditions. A person receiving mental health crisis treatment does not have to access debt advice first, but evidence from an Approved Mental Health Professional will be needed to allow a debt advice provider to start a moratorium for them.


The definition of a "qualifying debt," for the purposes of a moratorium, can be found in Regulation 5.


When creditors, such as local authority landlords are notified about a moratorium debt, they must pause enforcement action and freeze charges, fees and certain interest for the duration of the moratorium. Further information can be found in Regulation 7. Creditors must also conduct a reasonable search of their records for any additional debt(s) owed to them by the debtor, as they may be eligible to be added to the moratorium. Creditors must decide what constitutes a reasonable search, based on their circumstances.


The Insolvency Service will on behalf of the Secretary of State, notify creditors when a debt/s has entered a moratorium. Creditors will need to prepare to receive notifications from the Insolvency Service and process them in order to implement the protections. Ahead of the scheme's commencement on 4 May 2021, local authority landlords should consider whether they need to make any changes to their rent collection and arrears recovery systems and processes to comply with the regulations.


If they have not done so already, we would recommend that local authority landlords please contact to discuss their options for receiving and managing notifications.


Guidance for creditors was published at the end of last year to assist them in understanding the regulations and is available online on the Government website.

Like emailLink
ARCH Member Comments 5 people like this