THOUSANDS are missing out on using a little-known Government scheme offering extra time to clear debts.
The Debt Respite Scheme, also known as Breathing Space, gives you legal protections from creditors for a set period.
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The protections include pausing enforcement action, such as bailiffs, contact from creditors and freezing interest and charges on debts.
A creditor is anyone you might owe money to – this might be a bank, credit card company or a loan company.
Government statistics reveal there have been over 130,000 Breathing Space registrations since the scheme was launched in May 2021.
But when ministers launched the scheme, it was expected over 700,000 people would benefit from the scheme in its first year.
That means thousands who could be getting help through the scheme aren’t.
Here we explain how the scheme works and how to apply if you’re struggling with your finances.
What is the Debt Respite Scheme?
The Debt Respite Scheme was launched to help people in debt and struggling to make payments to creditors.
There are two options available to you – standard Breathing Space and mental health crisis Breathing Space.
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Most people opt for the standard Breathing Space option.
This allows you time to get debt advice and set up a debt solution without having to worry about being chased by creditors.
This might come in the form of a repayment plan for your debt, or an administration order, debt consolidation plan or insolvency.
If you pass eligibility checks, your creditors won’t be able to add interest or fees to your debts, or take enforcement action, including sending bailiffs to your home, for up to 60 days.
However, if you can afford to be making regular debt repayments, the Breathing Space won’t stop this from happening.
The mental health crisis Breathing Space is much less common and for those receiving mental health crisis treatment.
The protections involved are much stronger compared to the standard Breathing Space.
It lasts as long as the person’s mental health crisis treatment, plus an additional 30 days.
The advantage to this is that it doesn’t matter how long your mental health crisis treatment lasts, you will be legally protected.
Who is eligible?
You can apply for either Breathing Space scheme if you live in England or Wales and must owe at least one qualifying debt to a creditor. This includes:
- credit cards
- store cards
- personal loans
- pay day loans
- overdrafts
- utility bill arrears
- mortgage or rent arrears
But there are certain debts you can’t use the scheme for. This includes:
- secured debts such as mortgages or conditional sale agreements
- debts incurred from fraud or fraudulent breach of trust
- liabilities to pay fines imposed by a court for an offence
- obligations from a confiscation order
- child maintenance or obligations under an order made in family court proceedings
- a crisis or budgeting loan from the social fund
- student loans
- damages they need to pay for death or personal injury caused to someone else
- advance payments of Universal Credit
- council tax liabilities that have not yet fallen due
You can’t apply if you have already used the same scheme in the last 12 months – but you may be able to use the mental health crisis scheme if you’ve already used the standard one.
You also won’t be eligible if you already have a debt relief order or individual voluntary arrangement (IVA).
Anyone who’s the subject of an interim order or who is going through bankruptcy that has not been discharged by the court.
There’s no limit to how many times you can enter a mental health crisis Breathing Space.
If you are applying for the mental health crisis Breathing Space, you will need to do alongside an Approved Mental Health Professional (AMHP).
They will help you provide evidence you are receiving mental health crisis treatment.
Is the scheme for me and how do I apply?
When the Debt Respite Scheme launched in May 2021, money-saving expert and Mental Health Policy Institute founder Martin Lewis hailed it a “win-win-win”.
“For individuals who get their finances back on track, creditors who’ll recoup more cash in the long run, and the economy as there will be less financial catastrophe,” he said.
While the scheme can help in the short term, you’ll likely need further help to manage debts longer term – but there’s plenty of help available.
Sara Williams, who writes the Debt Camel blog, said: “The biggest drawback is that it only lasts for 60 days.”
“At the end of that you are likely to get a lot of letters and other contacts from creditors in your Breathing Space.”
“For many people, 60 days will be too short to find a new job, get benefits applications and appeals resolved, or clear priority debts.”
She suggested firstly talking to a local debt adviser such as Citizens Advice to see if they think a Breathing Space is your best option.
You can also get a temporary hold put on accounts such as credit cards, unsecured loans and overdrafts without setting up a formal Breathing Space.
You or your debt adviser can speak to your creditor and ask if they can accept no payments or lower amounts for a few months.
Or, alternatively, if you want interest and charges stopped and you know this will have to be for more than 60 days, you can set up a payment arrangement or a debt management plan through a charity like Stepchange.
It offers independent debt advice and can even take you through the Breathing Space application process.
You can apply for either Breathing Space option through a debt adviser.
The moneyhelper.org.uk website, run by the Government, has its own debt adviser finder tool, which is free to use.
You can use it to find an adviser to chat to online, over the phone or face-to-face about your next steps.
Depending on which option you choose, you will either have to enter your postcode telling you the nearest centre to go to.
Or, you will be redirected to a charity or debt adviser’s website or contact number.
Alternatively, you can call these three charities who will be able to help you further:
- Turn2us – 0808 802 2000
- Policy in Practice – 0330 088 9242
- EntitledTo – 0800 328 5644
