In May 2021, the UK government launched a scheme to give people struggling with problem debt a 60-day 'breathing space' period, protecting them from further interest and charges while they get on top of their finances.
In this article, we explain how the Breathing Space scheme works, who is eligible for the scheme and how you can apply for debt relief.
What is the Breathing Space scheme?
Breathing Space, also known as the Debt Respite Scheme, was created by the UK government to help people in England and Wales struggling with mounting debt get their finances back on track. The scheme is designed to provide short-term relief from creditors and to pause interest and penalty charges while you seek help from a professional debt adviser and set an affordable repayment plan. There are two types of Breathing Space schemes; Standard Breathing Space and Mental Health Crisis Breathing Space.
Breathing Space is not a form of payment holiday from your debt. You are still legally required to pay your debt and liabilities if you can afford to do so. Your debt adviser can help to advise the best course of action for managing debt repayments.
There is a similar scheme in Scotland called the Statutory Moratorium.
How does the Breathing Space scheme work?
The following comparison table highlights how the Breathing Space schemes work and compares the differences between the two Breathing Space schemes.
| Standard Breathing Space | Mental health crisis Breathing Space | |
| Must live in England or Wales |  |
|
| Must have qualifying debt | |
|
| Must be receiving mental health crisis treatment |  |
|
| How to access the scheme | Through a debt adviser | Via a debt advice provider with evidence from an Approved Mental Health Professional |
| How long does the scheme last? | Up to 60 days (midway review with a debt adviser after 25 - 35 days) | As long as the crisis treatment, plus 30 days (ongoing treatment must be confirmed every 20 - 30 days) |
| How does the scheme work? | Pauses debt enforcement action and contact from creditors as well as debt interest and charges | Pauses debt enforcement action and contact from creditors as well as debt interest and charges |
| Conditions of the scheme | You must remain in contact with a debt adviser
You must continue to pay certain debts/bills if you can Inform your debt adviser of any changes to your circumstances Not take out any additional borrowing over £500 |
You must provide accurate information
You must continue to pay certain debts/bills if you can Must have crisis treatment confirmed every 30 days |
| How often can you have a breathing space | Once a year | No limit |
(Source: gov.uk)
Who is eligible for the Breathing Space scheme?
To be eligible for the Breathing Space scheme you must:
- Live in England or Wales
- Have a qualifying debt
- Have not accessed a Breathing Space scheme in the last 12 months (for Standard Breathing Space only)
- Be receiving mental health crisis treatment (for access to the Mental Health Breathing Space)
- Not have an individual voluntary arrangement (IVA), a debt relief order (DRO), an interim order, or be undischarged bankrupt
Which debts does the Breathing Space scheme cover?
Most debts qualify for the Breathing Space scheme, including:
- Credit cards
- Store cards
- Personal loans
- Payday loans
- Overdrafts
- Utility bills arrears
- Rent and mortgage arrears
- Government debts e.g tax and benefit debt
If you have a joint debt (e.g a mortgage) and only one of you wants to access the Breathing Space scheme, you can do so, but you must notify the joint debt holder first.
Which debts are excluded from the Breathing Space scheme?
The following debts are examples of debts excluded from the breathing space scheme:
- Secured debts (arrears on these debts can be included in the scheme if they exist at the time of the application)
- Debts as a result of fraud
- Debt relating to a fine imposed by a court for an offence
- Child maintenance
- A crisis or budgeting loan
- Student loans
- Damages payable due to the death or personal injury of another individual
- Universal Credit advance payments
How do I apply for the Breathing Space scheme?
The standard version of Breathing Space can be accessed by contacting a professional debt adviser, who can determine if you are eligible for the scheme and initiate your application.
For those undergoing mental health crisis treatment, a mental health professional involved in your care can certify that you are receiving treatment and pass on the application to a professional debt adviser on your behalf. For more information on the link between money and mental health, and some useful links if you need help, visit our article 'The impact of debt on your mental health and how to get help'.
Does the Breathing Space scheme affect your credit report?
According to the government website, if you take part in the Breathing Space scheme there "should be no automatic effect on the credit file triggered by starting the breathing space, and there is no automatic flag or code that will stay on the file after the breathing space has finished." However, credit firms will still report to credit reference agencies whether debt payments have been received throughout the Breathing Space term which may impact your credit report if no payments have been made.
If you are unsure what your credit score is or of the information on your credit report, you can find out how to check your credit file in our article, 'How to check your credit report for free'.
Summary
It is important to note that although interest and fees are frozen, the Breathing Space scheme should not be treated like a payment holiday.
People using Breathing Space will need to keep paying any debts and ongoing liabilities they have - such as their mortgage, rent and bills - whilst they work alongside a professional debt adviser to find a sustainable debt solution. If someone in a standard Breathing Space fails to comply with these obligations, then their debt adviser has the discretion to withdraw their Breathing Space.
Once the Breathing Space expires the debt companies can continue to charge interest and chase payments which is why it is imperative to work closely with the debt adviser to reach a solution to repay your debts.
For further advice on how to tackle debt, try our articles 'Where to get free debt advice' and 'The simple tricks to repay debt quicker'.
