Breathing Space – Interest, Fees & Enforcement ‘Freeze’ for Those Facing Problem Debt or those who are Receiving Mental Health Crisis Treatment

Posted on January 22nd, 2021

https://www.gov.uk/government/news/breathing-space-to-help-millions-in-debt

The Government’s new Breathing Space period will freeze interest, fees and enforcement for people in problem debt, with further protections for those in mental health crisis treatment.

The scheme will ban banks and landlords from chasing tenants for unpaid debts, by offering them a period of time to try to find a solution to their financial problems. It will impact on landlords – particularly those seeking possession due to arrears.

The Debt Respite Scheme (also known as Breathing Space) will come into force in May 4.

There are two types of breathing space that a tenant may enter into: 

• standard breathing space and
• mental health crisis breathing space.  

Both types of breathing space operate in a similar way. Creditors are not allowed to contact them directly to request payment of the debt, or take enforcement action to recover the debt (including by taking possession of a property).

However, the duration and frequency of the breathing spaces vary. A ‘standard’ arrangement will last for a maximum of 60 days, for a mental health crisis breathing space, the Breathing Space ends 30 days after the tenant’s treatment ends. 

Local authorities providing debt advice and FCA approved debt advisors can grant Breathing Spaces to people in debt – they would be expected to speak to them the establish whether this is the best thing for them.

Millions of people with problem debt, including those facing mental health problems, will be helped by the government to get their finances under control.

A 60-day breathing space period will see enforcement action from creditors halted and interest frozen for people with problem debt. During this period, individuals will receive professional debt advice to find a long-term solution to their financial difficulties.

As well as this, those receiving mental health crisis treatment will receive the same protections until their treatment is complete, in acknowledgement of the clear impact problem debt can have on wellbeing.

The impact assessment for breathing space, published today, forecasts that it will help over 700,000 people across the UK get professional help in its first year, increasing up to 1.2 million a year by the tenth year of operation.

For further information see; https://www.gov.uk/government/publications/debt-respite-scheme-breathing-space-guidance