What is a breathing space?
There are two types of breathing space:-
- a standard breathing space – available to anyone who has problem debt.
- a mental health crisis breathing space – available to anyone who is receiving mental health crisis treatment.
How can a debtor get a breathing space?
A breathing space is not automatically granted to a debtor who is struggling with their debt. In order to be granted a breathing space, a debtor will need to either:-
- contact a professional debt advisor; or
- contact an approved mental health professional
who will assess whether they are eligible for the scheme. A “standard” arrangement will last for a maximum of 60 days and for a mental health crisis breathing space the arrangement will end 30 days after the individual’s treatment has ended, no matter how long the crisis treatment lasts.
Who can start a breathing space?
- a debt advice provider authorised by the Financial Conduct Authority; or
- a local authority (where they provide debt advice to residents).
Eligibility
There are certain criteria that have to be met in order to be eligible for the scheme, which, amongst others are:-
- the debtor is not subject to a debt relief order, an individual voluntary arrangement or an interim order. Nor is the debtor is an undischarged bankrupt at the time of the application;
- the debtor must not already have had a standard breathing space in the last 12 months prior to applying;
- the debt adviser must be satisfied that the individual cannot or is unlikely to be able to repay all or some of the debt, and that a breathing space is appropriate.
Creditors
If a creditor is notified that a debt owed is in a breathing space, all enforcement action, to include interest, fees, penalties and charges must stop until the breathing space ends. A notification will be given to the creditor as to when the breathing space commenced.
Ongoing liabilities
Debtors must keep paying their ongoing liabilities during the breathing space otherwise the debt adviser might cancel the standard breathing space (this does not apply to the mental health crisis breathing space). Ongoing liabilities include rent due under a tenancy agreement but not arrears accrued prior to the start of the breathing space.
Practical points for landlords and other creditors
Landlords should be mindful when pursuing residential tenant arrears, of the possibility that the debt may be subject to a breathing space. This should to be notified to the creditor by the debtor, but it is possible that the landlord will not have been notified before the landlord decides to take enforcement action.
In addition:
- debtors cannot be contacted by creditors during the breathing space. However, creditors can contact the debtor’s debt adviser about the debt owed or to discuss a solution;
- creditors can request a review of the breathing space and this must be done within 20 days of the start of the breathing space. Creditors can also apply to court if they do not agree with a debt adviser’s decision, which must be done within 50 days of the breathing space starting; and
- once the breathing space has ended, the creditor can start applying interest, fees, penalties and charges from the date that the breathing space ends (which cannot be backdated), continue to take enforcement action or start or continue any legal proceedings.
Authored by Amy Dunn
