Earlier this month, the Government set out details of a new Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) – which is to be also known as ‘Breathing Space’ law – that comes into effect in May 2021.
This new law is designed to give tenants legal protection from all creditors – including landlords or their letting agents, if they are experiencing financial difficulties due to a loss in income as a result of the COVID 19 pandemic. Those with debts can only access a breathing space by seeking debt advice from a debt adviser.
The details of the scheme, as set out on the Gov.uk website (https://www.gov.uk/government/publications/debt-respite-scheme-breathing-space-guidance) explains that there will be two types of breathing space – a standard breathing space and a mental health crisis breathing space.
1. A Standard Breathing Space
A standard breathing space is available to any individual with problem debt and gives them legal protections from creditor action for up to 60 days.
“The protections include pausing most enforcement action and contact from creditors and freezing most interest and charges on their debts” says the government guidance.
As a creditor (or landlord with a tenant in this situation), if you’re told that a debt owed to you is in a breathing space, you must stop all action related to that debt and apply the protections. These protections must stay in place until the breathing space ends.
As a creditor, you get a notification to tell you about each debt owed to you in a breathing space and the date the breathing space started. You need to make sure you apply the protections to these debts from the date set out in the notification.
Individuals can access this standard breathing space – which the government states “is not a payment holiday” – only through an approved debt adviser registered with the Financial Conduct Authority, or via a local authority if it is approved to offer this kind of advice to its residents.
An individual who applies for such a ‘space’ can get no more than one a year.
2. A Mental Health Crisis Breathing Space
A mental health crisis breathing space is only available to a client who is receiving recognised mental health crisis treatment. If an approved mental health professional certifies a client is in mental health crisis treatment, the client or someone else might ask for a mental health crisis breathing space on the client’s behalf.
The mental health crisis breathing space has some stronger protections than the standard breathing space. It lasts as long as the client’s mental health crisis treatment, plus 30 additional days thereafter, no matter how long the crisis treatment lasts.
Again, if you’re a creditor – that is, a landlord with arrears owed – and if you’re told that a debt owed to you is in a breathing space, you must stop all action related to that debt and apply the protections.
These protections must stay in place until the breathing space ends.
From a landlord perspective, if you receive a notification of a breathing space debt that you have sold to another creditor – so lets say, you have sold your buy to let property to another investor – you must tell that creditor the breathing space has started and give their contact details to the debt adviser.
Who can Apply?
Anyone who cannot or is unlikely to be able to repay their debts can apply to a debt adviser for a standard breathing space. Although all applications must be considered, the debt adviser might decide a breathing space is not appropriate for a debtor. It shouldn’t be confused with other insolvency arrangements that may effectively ‘write off’ a debt – this law is about giving a debtor extra time to sort themselves out.
As the Government guidance says “For example, if a person could pay their debts with some budgeting help, or they already have assets that could easily be sold to clear the debt, a breathing space may not be the right solution. A breathing space might also not be appropriate for a someone who can enter a more suitable debt solution straight away, without needing the protections.”
In the case of a mental health crisis breathing space, it’s slightly different and people receiving mental health crisis treatment, do not have to access debt advice first. If an Approved Mental Health Professional (AMHP) certifies that a person is receiving mental health crisis treatment, the AMHP’s evidence can be used by a debt adviser to start a mental health crisis breathing space.
In addition to the debtor, the following people can apply to a debt adviser on behalf of a debtor for a mental health crisis breathing space:
the debtor’s carer
Approved Mental Health Professionals
care co-ordinators appointed for the debtor
mental health nurses
independent mental health advocates or mental capacity advocates appointed for the debtor a debtor’s representative
Debtor eligibility for a standard breathing space
Before a debt adviser can start the breathing space, they must confirm their client is eligible and meets all the conditions. These are that the debtor must:
be an individual
owe a qualifying debt to a creditor
live or usually reside in England or Wales
not have a debt relief order (DRO), an individual voluntary arrangement (IVA), an interim order, or be an undischarged bankrupt at the time they apply
not already have a breathing space or have had a standard breathing space in the last 12 months at the time they apply
The debt adviser must also be satisfied that their client meets both of the following conditions:
their client cannot, or is unlikely to be able to, repay all or some of their debt
a breathing space is appropriate for their client
Debtor eligibility for a mental health crisis breathing space
The debtor must still meet the same criteria and conditions for a standard breathing space, but they must also be receiving mental health crisis treatment at the time that an application is made. A debtor who has had a standard or mental health crisis breathing space in the last 12 months may be eligible for a mental health crisis breathing space.
There is no limit to how many times a debtor can enter a mental health crisis breathing space.
If you have any questions about a breathing space you’ve had a notification for, you should contact the debt advice provider whose details are in the notification.