New scheme to provide extra protection for debtors

30th March 2021

New scheme to provide extra protection for debtors

The Debt Respite Scheme is due to come into force this year, providing added legal protection to debtors from creditors by placing them in a moratorium (“Breathing Space”).

This may be concerning to creditors who may be left with numerous questions surrounding the scheme.

Below, Higgs & Sons’ Debt Recovery Manager Arshad Mohammad takes a closer look at what the introduction of the new scheme will mean in reality.

What is the Scheme?

The Scheme provides legal protection to debtors from creditors by allowing individuals to apply for Breathing Space which lasts for 60 days. If an individual is receiving treatment for mental health, then they can be granted Breathing Space until they recover plus 30 days.

When does the Scheme come into force?

The Regulations come in on May 4, 2021.

Who is managing the Scheme?

The Scheme is administered by the Insolvency Service, which will maintain a register of people in a Breathing Space.

Can all the debtors that owe me money apply for Breathing Space?

The debtor must be unable to repay all or some of their debt and must:

  • be an individual
  • owe a qualifying debt to a creditor
  • live or usually reside in England or Wales
  • not have a Debt Relief Order (DRO), an Individual Voluntary Arrangement (IVA), an interim order, or be an undischarged bankrupt at the time they apply
  • not already have a Breathing Space or have had a standard Breathing Space in the last 12 months at the time they apply

What is a qualifying debt?

  • credit cards
  • store cards
  • personal loans
  • pay day loans
  • overdrafts
  • utility bill arrears
  • mortgage or rent arrears
  • most government debts
  • joint debts (one person can apply)
  • guarantor loans (guarantor must apply separately)

How do I know if the debtor has applied for Breathing Space?

The debtor would have started the Breathing Space either through a debt advice provider authorised by the Financial Conduct Authority or their local authority, if it provides debt advice to residents. The debt advice provider will send you notification and it is from this date that the legal protection must apply.

What legal protection must a creditor apply?

Upon receiving notification, the creditor must

  • not contact the debtor to seek payment
  • stop all interest and charges
  • pause all legal, enforcement and recovery action

If the debtor continues to pay me, can the creditor accept the payments?

Yes, the creditor can accept the payments as debtors are still legally required to pay their debts and liabilities.

What if the creditor has already started legal proceedings?

The creditor must inform the court as soon as possible that the debtor is in a Breathing Space.

What if the creditor doesn’t offer the legal protections?

If the protections are not applied, then any action the creditor takes will be null and void and the creditor can be liable for the debtor’s costs. The debtor can complain to the regulatory body and the Insolvency Service may contact the creditor.

How does a creditor know when a Breathing Space ends?

The creditor will be sent notification that the Breathing Space has ended. This may be if it has been 60 days from the date the Breathing Space started (or 30 days after the debtor’s mental health treatment came to an end) or if the debt adviser/court cancels it or if the debtor dies. Once the Breathing Space comes to an end, the creditor can continue with the recovery process.

For more information, please contact Arshad at or 01384 327192.



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