AS the cost of living crisis hits households, it’s important to know about schemes which can help you if you’re struggling with debt.
If you’re in financial distress and worried about paying your bills then you can ask your creditor for “breathing space“.
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It means you can apply for the two-month “buffer” that is designed to give people time to get long-term help for their debts.
The scheme was first announced in 2019. It covers a wide range of debts including your council tax arrears, personal tax debts, benefit overpayments, credit cards and loans.
If you get approved for the scheme, you must work with a professional advisor to help you get back on track.
However, if you’re receiving NHS treatment for your mental health, you’ll be exempt from this condition.
Most debts are covered by this scheme including:
- Credit cards
- Store cards
- Personal loans
- Pay day loans
- Overdrafts
- Utility bill arrears
- Mortgage or bill rent arreras
Joint debts and guarantor loans are also covered by this scheme.
However, if you receive a new debt after applying for the scheme, it won’t be covered.
There are debts that aren’t covered by the scheme including:
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- Secured debts
- Debts incurred after your breathing space started
- Debts from fraud
- Court fines (however, penalty charges are covered)
- Child maintenance debts or money owed to another family member under an order
- Debts from confiscation order
- A crisis or budgeting loan
- Student loans
- Advance payments of universal credit
- Council tax debts that are not due yet
- Personal injury damages
How do I apply?
You cannot apply for the scheme if you have a debt relief order, individual voluntary arrangement or you’ve filed for bankruptcy.
In order to apply you must seek advice from a debt adviser. If you’re unsure where to start then speak to an organisation such as StepChange or the National Debtline.
The debt adviser will see if you’re eligible for the scheme and submit an application to the Insolvency Service on your behalf.
You will require the following information to provide to your debt adviser:
- Full name
- Date of birth
- Home address
- Details of debts owed
- Name and contact details for the creditor
If you’re receiving treatment for your mental health then someone else, such as a social worker or mental health nurse, can apply on your behalf.
The breathing space period will last throughout your treatment, and an extra 30 days once your treatment is completed.
What happens during my breathing space period?
The breathing space will last 60 days. During this time none of your debts will earn interest and no fees will be added.
You’ll be protected from debt collectors and bailiffs.
StepChange states you must keep up with regular debt payments when possible, seek advice and keep your advisor informed of your progress. You must also avoid taking out more credit.
Between days 25 and 35 during this period you’ll have a review with your adviser. If you’ve not met all of your obligations the breathing space period may be cancelled. Therefore it’s important to put in the work to ensure it’s not cancelled.
Once it ends, creditors will begin to contact you again and if they need to they’ll able to take action against you.
During the first year of this scheme one in 736 adults entered a breathing space in England and Wales.
The local authorities with the highest breathing space rates were in the North West, North East, Yorkshire and the Humber.
The breathing spaces were most common in adults between the ages of 25 and 44, with the lowest rates for those aged 65 and above.
There are various other schemes that will support you during the financial crisis. The Household Support Fund is one of them.
If you’re receiving Universal Credit you be missing a huge cash bonus. Find out how to get it here.
