In a society where financial hardship is all too common, the Breathing Space scheme emerges as a beacon of hope for individuals struggling with debt in England and Wales. The scheme was introduced into UK regulations and provides much needed respite to those stained by debt, providing a legal framework aimed to alleviate the pressure and facilitate a path of sustainable debt management.
What Does the Breathing Space Scheme Entail?
The Breathing Space scheme, created under the Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) Regulations 2020, provides individuals in debt a period of protection from creditor action. This protection aims to give individuals in hardship the opportunity to seek advice, devise a repayment plan, and recover control of their financial circumstances without the constant prospect of enforcement action by creditors.
How Does the Breathing Space Scheme Work Effectively?
The scheme allows eligible individuals to apply for a breathing space period, during which most forms of creditor enforcement are temporarily halted. This includes pausing demands for repayment, freezing interest and charges on debts, and preventing the initiation or progression of legal proceedings.
There are two types of Breathing Space schemes available:
Standard Breathing Space: This type offers individuals a 60-day period of protection from creditor enforcement actions, allowing them the opportunity to seek debt advice and devise a sustainable repayment plan.
Mental Health Crisis Breathing Space: This scheme is created to assist individuals receiving mental health crisis treatment. It provides additional protections and can be extended for the duration of the person’s treatment, plus 30 days.
During the Breathing Space period, individuals must seek debt advice and collaborate with a debt advisor to develop a sustainable repayment plan tailored to their circumstances. This plan aims to address the root causes of their financial difficulties and facilitate a structured approach to clearing their debts.
Who Can Qualify?
To qualify for the Breathing Space scheme, individuals must satisfy certain requirements, including residing in England or Wales and owing qualifying debts. Notably, debts such as student loans, fines resulting from criminal convictions, and liabilities arising from family court proceedings are not covered under the scheme.
Furthermore, individuals cannot apply for Breathing Space if they have received one within the past 12 months, unless they are experiencing a mental health crisis. This restriction guarantees that the scheme remains accessible to those who truly require its support.
The Advantages of Breathing Space
The Breathing Space scheme offers several benefits to individuals struggling with debt:
1. Protection from Creditor Action: During the Breathing Space period, individuals are protected from aggressive creditor enforcement actions, giving them much-needed relief and the opportunity to focus on addressing their financial issues.
2. Breathing Room to Seek Advice: By pausing creditor demands and freezing interest and charges, the scheme affords individuals the time and space to seek professional debt advice and explore feasible solutions for managing their debts.
3. Structured Debt Repayment Plan: By working with debt advisors, individuals can create structured repayment plans specific to their financial circumstances, empowering them to take proactive steps towards debt settlement.
4. Reduced Stress and Anxiety: Creditor pressure can significantly reduce the stress and anxiety associated with debt, allowing individuals to regain a sense of control over their financial futures and improve their overall general health.
How Creditors Can Assist Individuals
While the Breathing Space scheme protects individuals in debt, creditors also play an important role in supporting those navigating financial difficulties.
Here are a few ways creditors can assist individuals in this situation:
1. Communication and Understanding: Creditors should keep open lines of communication with debtors and demonstrate empathy and understanding towards their financial circumstances.
2. Flexibility in Repayment Arrangements: Creditors can explore flexible repayment options with debtors, such as extending repayment periods, freezing interest, or agreeing to reduced payments, to help ease the burden of debt.
3. Referral to Debt Advice Services: Creditors can signpost debtors to reputable debt advice services, ensuring they have access to the support and guidance needed to properly resolve their financial issues effectively.
4. Compliance with Breathing Space Regulations: It is essential for creditors to follow the regulations outlined in the Breathing Space scheme, including honouring the Breathing Space period and refraining from taking prohibited enforcement actions.
Will Creditors be Alerted after a Breathing Space Scheme Application has been Approved?
Once an application has been approved, the debt advisor assigned to the case notifies creditors that the applicant has entered a breathing space scheme. In addition, it is also their obligation to notify creditors of the individual’s protected status and the temporary halt on creditor enforcement actions. Additionally, creditors are provided with information regarding their obligations to ensure compliance with the regulations.
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