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The Breathing Space Scheme – A Matter of Time and Space
If you have a problem with outstanding debt or have individuals who owe money to you, then now is the time consider what is commonly referred to act the ‘Breathing Space Act’.
On 4 May 2021, The Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020, comes into force. The scheme essentially gives more time for people with problem debt to stave off further action from creditors and gives further protection to those receiving mental health crisis treatment.
It is important for those who owe money and those who are owed money to understand what is required of them.
Within this article I will provide a brief overview of the scheme and whether Creditors and Debtors need to act now.
What if I owe money and I need more time to pay?
It is important to know that the scheme is not a tool to avoid paying any debts you have and is there to make any debts more manageable. Please remember that you are not alone and seeking professional advice can often make things much easier.
This is perhaps the reason why you cannot obtain protection on your own and you have to contact a debt advice provider who is authorised by the Financial Conduct Authority (FCA) or your local authority to seek protection and advice.
It is important to act fast and to contact a debt advisor to see if you are eligible for protection. The scheme will not be suitable for everyone and eligibility conditions do apply. A debt advisor can give you further details on whether the scheme will help your individual situation or what your other options are.
Not all debts are covered but they do include credit cards, store cards and utility bill arrears. The scheme does not give protection from Court fines or secured loans such as mortgages, among others.
Once you are entered into the scheme, you will receive protection from further legal action and enforcement for a period of 60 days. The debt advisor will maintain this protection and act as a go-between you and the people you owe money too. It may be that you can reach an agreement in this period and avoid paying future fees.
What if I owe money and I am receiving mental health crisis treatment?
You will still need to contact a debt advisor as soon as possible and confirm your eligibility for the scheme.
In addition to this, you must have evidence that you are currently undergoing mental health crisis treatment from an approved Mental Health Professional (AMHP). If you are unsure if this is the case, talk to your treatment provider and they will provide you with further information.
If you are unable to contact a debt advisor yourself, a representative can contact them on your behalf, including mental health nurses and social workers.
If you are eligible for the scheme, you will receive additional protection from any legal action for the duration of your treatment and an additional 30 days after your treatment is completed.
The scheme does have some time limits, but your debt advisor will provide further advice on this.
What if I am owed money?
First of all, the scheme is not yet in place and you may wish to start action now if you are concerned about the time it will take to recover any debts. During the Covid-19 pandemic, legal proceedings and enforcement action is possible and you may even get your money back before the scheme goes live if you act quickly.
Even after the scheme is open, it is important to remember that the scheme does not apply until you are notified of the breathing space protection. Not all debts are eligible for protection and the scheme may not affect your options at all.
Once you have received the breathing space notification, it is important to contact the debt advisor as soon as possible to discuss the debt and start a dialogue. Just because the debt is protected does not mean that you will not receive the debt before the protection ends. A debt solution may be possible, and this may be beneficial to both you and the debtor.
If you have already started legal actions or instructed agents to collect your debt, you must inform them immediately. Any enforcement action must be stopped, and you may be liable for the debtor’s costs if you take any prohibited action during the protection period.
Need more advice?
Whether you are owed money or you owe money, we can help.
If you owe debt, we can recommend a number of debt advisors who will be able to provide you with further advice.
If you are owed money and you are concerned about your options, please get in touch and we can provide clear advice about your next steps.
For more information contact our Dispute Resolution Team on 01782 813315 or by going to Dispute Resolution - Solicitors in Stafford and Stoke on Trent
Author: James Faulkner, Solicitor in the Dispute Resolution Team.