New ‘breathing space’ scheme for those with debt

Anyone in debt in England and Wales can apply, but you must meet the eligibility criteria, as follows:

• Be an individual
• Owe at least one ‘qualifying debt’ to a creditor including:
  • Credit cards
  • Store cards
  • Personal loans
  • Pay day loans
  • Overdrafts
  • Utility bill arrears
  • Mortgage or rent arrears
  • Government debts like tax and benefit debts
• You must not be currently using other official ways of managing debt such as an Individual Voluntary Arrangement (IVA)
• You must not be an undischarged bankrupt
• You must not already have a breathing space or have had a standard breathing space in the last 12 months at the time they apply

The debt adviser must also be satisfied that their client cannot, or is unlikely to be able to, repay all or some of their debt and a breathing space is appropriate for their client.

• Secured debts (like mortgages, hire purchases or conditional sale agreements). You can only include arrears on these debts that exist at the data of an application for a breathing space
• Debt incurred from fraud or fraudulent breach of trust
• Liabilities to pay fines imposed by court for an offence
• Child maintenance
• Student loans
• Advance payments of Universal Credit

You can access the scheme via a professional debt adviser and provide details about your debt. Although all applications must be considered, the debt advisor may decide that Breathing Space is not appropriate for the debt.

In order for your debt adviser to apply, you need to provide them with your:

• Full name
• Date of birth
• Usual residential address
• Details of the debts you owe, including the type of debt
• The name and contact details for the creditor
• Trading name or names and business address
• Previous addresses

Your debt adviser will complete an application to the Insolvency Service, which administers the scheme. Once your application is submitted, your Breathing Space will start. You will receive a notification electronically or via post telling you the Breathing Space start date and details of your qualifying debt. If you have more than one debt, you will receive a notification for each debt.

Breathing Space is a temporary fix. You will need to continue working with your debt adviser to make a plan to deal with your debts.

If you can, you still need to make certain payments during a breathing space. Whilst the creditor cannot enforce the debt or charge interest or fees, you’re still legally required to pay what you owe. A Breathing Space is not a payment holiday. Instead, it’s an opportunity to get a handle on your finances without scary letters and big fees piling up.

You also cannot take out more than £500 in additional credit whilst in a Breathing Space.

There are many reasons why your debt adviser might feel a Breathing Space is not for you. These may be the form of debt or if you have assets you could sell to pay the debt off quickly — or they may consider it in your best interests to go straight into a debt solution such as an IVA.

If an Approved Mental Health Professional certifies that a person is receiving mental health crisis treatment, this evidence can be used by a debt advice provider to initiate a Mental Health Crisis Breathing Space (MHCBS).

The MHCBS is a little different to a standard Breathing Space and has stronger protections than a standard breathing space. For example, the MHCBS lasts as long as a person’s mental health crisis treatment, plus 30 days (no matter how long the crisis treatment lasts)

In addition to the debtor, the following people can apply to a debt adviser on behalf of a debtor for a mental health crisis breathing space:

• any debtor receiving mental health crisis treatment
• the debtor’s carer
• Approved Mental Health Professionals
• care co-ordinators appointed for the debtor
• mental health nurses
• social workers
• independent mental health advocates or mental capacity advocates appointed for the debtor
• a debtor’s representative

The debtor must still meet the same criteria and conditions for a standard breathing space, but they must also be receiving mental health crisis treatment at the time that an application is made. A debtor who has had a standard or mental health crisis breathing space in the last 12 months may be eligible for a mental health crisis breathing space.

There is no limit to how many times a debtor can enter a mental health crisis breathing space.