You may have heard the recent news this past week signaling the launch of the Breathing Space Scheme (also known as the Debt Respite Scheme). We’ve been eagerly awaiting the scheme to come into play and we’ve been championing it throughout the past year, especially in our You Only Pay Once (YOPO) campaign. You can read more about our campaign here.
For those left wondering what this scheme is and how it helps those with financial difficulties, we’ve done the hard work for you and pulled together this handy guide to give you all the information you need.
Breathing Space is a new scheme that will give people temporary protection from most types of debt collection.
People can apply for the scheme through a debt adviser to give them 60 days ‘Breathing Space’ from any form of debt collection. This means that interest and fees will be paused on debts with the hope that people are able to take the necessary action to get on top of their finances during this time.
To use the scheme, there are some conditions that need to be met:
- You must continue to engage with your debt adviser and not take out any new borrowing over £500 in this time.
- You’ll also have to continue to make certain types of payments, including ongoing housing costs, utility bills, and taxes.
- You can only apply for Breathing Space once in a 12-month period.
Dealing with debt can have a serious impact on people’s mental health and wellbeing. If you’re currently being treated for a mental health crisis, then a separate scheme applies.
With this scheme an approved mental health professional will need to confirm you are receiving crisis care. Your GP can’t make this confirmation themselves, but they should be able to refer you to someone who can. You can then seek help from the scheme yourself, or someone else can apply on your behalf - for example a carer, social worker or mental health nurse.
The main difference compared to the standard scheme is that the pause on debt collection lasts as long as you’re receiving crisis treatment, plus an additional 30 days after. A nominated person will need to keep in touch with your debt adviser to update them about your ongoing treatment. However, you won't need to receive debt advice or meet any of the conditions outlined in the standard scheme above.
You can also apply for this type of Breathing Space more than once a year. If you still need more time to tackle your debts once your crisis treatment is over, you can still apply for the standard Breathing Space scheme afterwards.
For both types of Breathing Space, you’ll need to live in England or Wales and not currently be in another formal debt solution - like a Debt Relief Order, Individual Voluntary Arrangement or bankruptcy.
You’ll also need to owe at least one qualifying debt. These qualifying debts are quite broad, but can include things such as credit cards, personal loans or overdrafts.
Some debts won’t qualify for Breathing Space. These include court fines, Universal Credit advance payments and student loans. Secured debts like mortgages or car finance won’t qualify unless you’ve fallen behind with your payments.
A debt adviser can advise on whether Breathing Space is suitable for you whilst you identify a longer-term debt solution.
There’s no doubt that the coronavirus pandemic has had a huge impact on lots of people’s finances, but unfortunately for some, it’s left them unable to pay essential bills as they’ve fallen into further debt.
Whilst this new scheme is a step in the right direction to give people the time to get advice and start taking action, for those with unmanageable debts, it’s only a temporary fix.
If you feel you’re in a position where you can’t manage your debt, the most important thing is to seek help as soon as possible. There are plenty of free and impartial debt advice organisations like Citizens Advice, StepChange and Money Advice Service. They’ll help you to make a plan to move forwards and deal with your debts.