The New Debt Respite Scheme (Breathing Space)

This new legislation aims to provide further legal protection to individuals from their creditors, where the individual has problem debt(s). It gives them 'Breathing Space' to seek debt advice without incurring additional interest or being pursued by creditors whilst doing so.

This note aims to provide useful information and guidance on what the new legislation means for our clients and how it will impact debts owed to them.

Two Types of Breathing Space

Breathing Space is available to individuals via an authorised debt advice provider. If the individual is deemed to qualify, then the debt advisor will arrange one of the two following types of Breathing Space:

• Standard Breathing Space - this is available to anyone with a debt that they are unable or unlikely to be able to repay. It provides protection for 60 days and can only be used once in a 12 month period.
• Mental Health Crisis Breathing Space - this is only available to individuals receiving certified treatment for mental health crisis. The protection will last for the entirety of the treatment plus an additional 30 days. It can be used unlimited times.

Role of Creditors

If you are a creditor, you are subject to this new legislation and the obligations it places upon you. If you do not act within your obligations, you may be liable for any loss suffered by the debtors and dealing with it will increase management time and costs. The debt advisor will be your point of contact.

You will receive a notification either via email or by post when one of your debtors enters a Breathing Space. On receipt of a notification you must stop all enforcement action and chasing in relation to the debt immediately. Interest and other charges must not accrue during a Breathing Space.

If you are notified, let your solicitors and professional advisors know of as soon as you become aware of a breathing space for a debtor they are instructed to recover a debt from.

You should also check to see whether you have any other outstanding debts for the same person that you haven't been notified about. If you do, then you should contact the debt advisor and provide this information.

If the debt is a joint debt, you must act as if both debtors are in Breathing Space even if you have only been notified about one. For example, if one debtor enters Breathing Space, you cannot continue to chase the other debtor until the Breathing Space has ended.

What About Ongoing Payments?

A Breathing Space is not a payment holiday. Individuals are still liable for their ongoing commitments and so invoices that fall due within a Breathing Space period should be sent out as normal.

Debtors are still legally required to meet their obligations and should continue to make payments and you can accept the same. For example, if you have agreed an instalment arrangement with a debtor, they should continue to pay those instalments during the Breathing Space. However, if they do not, you cannot chase the missed payment until after the end of the Breathing Space.

What Should You Do Now?

• Ensure that you will receive notifications promptly, whether electronically or by post. If you do not take the appropriate action promptly, or your solicitors and advisors are not properly notified about a Breathing Space on a matter which they are dealing with, you may be liable for losses suffered as a result of non-compliance with your obligations under the legislation.
• Make sure that you have a clear system in place to mark files which are currently in Breathing Space to ensure that debtors are not contacted in relation to the debt and that interest ceases to accrue for that period.
• Consider whether to refer debts to us earlier as there will potentially be a further delay in the recovery process if the debtor goes into Breathing Space.
• Be aware that debtors who are individuals may apply for a Breathing Space.

If you would like to discuss the debt respite scheme, or any other aspect of VWV's commercial debt recovery or SFRS service, please feel free to contact any of the team members. Alternatively, please complete the form below.