On 4 May 2021, the Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations ("the Regulations") came into force. The Regulations introduce two new types of temporary debt enforcement moratoria, known as ‘standard breathing spaces’, and ‘mental health crisis breathing spaces’.
A standard breathing space will be available to anyone with problem debt and will protect them from creditor action for up to 60 days. Mental health crisis breathing spaces are only available to those in receipt of mental health crisis treatment and will last for the duration of that treatment, plus 30 days.
The breathing space moratoria apply to personal debts and may include rent arrears and monies owed in relation to an order or repossession warrant relating to a person's place of residence. Some business debts may qualify, but only where the debts relate to the debtor personally and not solely to the business, the debtor does not have a partner in the business, and the debtor is not VAT registered.
The moratoria are overseen by debt advisers who will notify creditors when a debtor owed to them has entered a breathing space. Once the creditor has been notified of the breathing space, the creditor is required to immediately stop all action related to that debt.
- all enforcement action;
- contacting the debtor to request repayment of the debt; and
- stopping interest, fees, penalties or charges accruing on the arrears during the breathing space;
- landlord creditors will be prevented from serving 'section 8' possession notices relying on Grounds 8, 10 or 11 of Schedule 2 of the Housing Act 1988.
Creditors can request a review within 20 days of commencement of the moratorium. The debt adviser overseeing the breathing space will also be required to carry out a midway review, even if there is no request for review from a creditor in the case of a standard breathing space.
The debtor must continue to pay ongoing liabilities and debts during the breathing space. The debt adviser may cancel the breathing space if the debtor does not meet their obligations and engage with the debt adviser in finding a way to manage the debt.
Any enforcement action taken during a breathing space moratorium will be null and void and the creditor may be liable for the debtor’s costs, if any. The debt adviser will contact the creditor regarding any breach of the breathing space and may also report the same to the Insolvency Service or to the creditor’s regulatory body where relevant.