A Guide for Creditors and Debtors
At Maxwell Hodge Solicitors, one of our many expertise is to represent clients in recovering debt amounts, seeing the matter through from initial negotiations to enforcement procedures.
Therefore, we are aware of the issues and questions faced not only by Creditors, but also Debtors alike.
Following the new regulations brought into force in May 2021, Maxwell Hodge has therefore devised a guide that provides a simple breakdown of some of the new rules of the Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020, in order to provide accessible information for both Creditors and Debtors.
If any further legal advice or support is needed regarding debt recovery, please contact us via;
Email – debtrecovery@maxweb.co.uk
Telephone – 0151 526 9321
Part 1 – Standard / Mental Health Crisis Breathing Spaces
A breathing space is a period of time which a Debtor can take away from the debts they owe, providing legal protections from the actions of Creditors. There are criteria and rules to be followed by both Debtors and Creditors when entering, during and leaving a breathing space, which will be discussed throughout.
There are two variations of breathing spaces;
Standard Breathing Space – Available to anybody with a qualifying debt. This will be discussed in Part 2.
Must be an eligible Debtor. This will be discussed in Part 2.
Allows for legal protections from the Creditor for up to 60 days, such as pausing enforcement methods, stopping contact from the Creditor and freezing most interest on debts.
Mental Health Crisis Breathing Space – Available to a Debtor who is receiving mental health crisis treatment.
Has stronger protections than a Standard Breathing Space, such as the inability of a mid-way review from the Creditor. This will be discussed in Part 4.
Lasts for the duration of the Debtor’s mental health treatment, plus 30 days.
Part 2 – Application for Breathing Spaces; Debtors
For Debtors, applying for a breathing space is a straightforward process.
For a Standard Breathing Space – The Debtor must first seek advice from a Debt Adviser. This is either a debt advice provider, approved by the FCA, or a local authority providing debt advice. The debt adviser may find that a breathing space is not appropriate if the Debtor can pay their debts, or may administrate the breathing space.
The Debtor must be eligible. This means the Debtor must:
- owe a qualifying debt to a creditor
- live or reside in England or Wales
- not have a debt relief order, an individual voluntary arrangement, 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.
The debt must be qualifying. Some examples of this include:
- credit card debts
- personal loans
- overdrafts
- bill arrears.
For further information on qualifying debts, please enquire using our contact information above.
For a Mental Health Crisis Breathing Space – An Approved Mental Health Professional (AMHP) can certify that a Debtor is receiving mental health treatment and this evidence can be used by a debt adviser to start a Mental Health Crisis Breathing Space.
Along with the Debtor, various other people can apply for a Mental Health Crisis Breathing Space on behalf of the debtor, such as an AMHP, the Debtor’s carer, social workers, mental health nurses, etc.
The same criteria and conditions as a Standard Breathing Space must be met here, as well as the need for the Debtor to be receiving mental health crisis treatment. Additionally, if the Debtor has had a Mental Health Breathing Space in the last 12 months, they are still eligible to apply for another one, as there is no limit to how many times these can be entered into by one Debtor.
Part 3 – During a Breathing Space; Creditors
Once a breathing space has been approved, it will start the day after it has been put onto the breathing space register and the Creditor will receive a notification to inform them of this.
From this point, the Creditors must act in a way that coincides with regulations. They must make a reasonable search to find the Debtor within their database, and note the file of the breathing space.
If the Creditor does not apply the protections, any action they take will be void and they may be liable for the Debtor’s costs.
A Creditor must:
- Stop the debtor having to pay certain interests, fees or charges on the debt.
- Stop any enforcement or inform agents to stop recovery.
- Stop contact with the Debtor requesting payment. Only contact with the debt adviser can continue, however please enquire about further guidance on this.
- Make a search for any additional debts of the Debtor that are not included in the breathing space. This should be reported to the debt adviser.
- Inform the courts of the breathing space when there are any existing legal proceedings.
- Stop any action to enforcement a court order or judgment.
However, during a breathing space, Debtors are simply free from enforcement procedures, and will still be liable to pay their debts during this time, such as ongoing liabilities.
If further advice is needed on this, please contact us via our contact details above.
Part 4 – Mid-way Review; Debtors
During a Standard Breathing Space, a debt adviser must carry out a mid-way review, between 25-35 days after the registration. A Creditor can also request a breathing space review.
This will not apply for a Mental Health Breathing Space, as the breathing space applies for the duration of the mental health crisis treatment, plus an additional 30 days. In these circumstances, a debt adviser will instead regularly check that the debtor is still receiving the mental health crisis treatment. This will only be cancelled if there is fraudulent or inaccurate information relating to the treatment, or the Debtor requests that the breathing space be stopped.
However, with Standard Breathing Spaces, if the Debtor has been meeting their obligations, the breathing space will continue, and if this is not the case, the breathing space can be cancelled by the debt adviser.
The debt adviser can cancel the breathing space for a number of different reasons and there are multiple ways for Debtors to respond. Please contact us for further information on this.
Part 5 – Ending a Breathing Space & Next Steps
When ending a breathing space, each type has varying rules and procedures …
Standard Breathing Space – Ends 60 days after the breathing space begins, or the day after the debt adviser decides to cancel it, if so.
Notification will be sent by the debt adviser to the Creditor to inform them of the cancellation of the breathing space.
Mental Health Crisis Breathing Space – Ends 30 days after the Mental Health Crisis Treatments ends, or 30 days after the debt adviser has received no response from the Debtor.
Notification will be sent by the debt adviser to the Creditor to inform them of the cancellation of the breathing space.
Once a breathing space has ended, there are multiple ways Creditors and Debtors can proceed following this, such as begin applying enforcement methods or going into a debt solution.
Please contact us for further information on this.
Part 6 – Summary for Creditors and Debtors
Debtors:
Application –
Must be eligible and have a qualifying debt. Must be approved by a debt adviser.
During –
Must maintain communication with debt adviser, may still have to pay debts.
Ending –
Can be ended by the debt adviser midway through, or will end after fixed time frames.
Creditors:
Application –
Will be made aware by the debt adviser, will have to check and note the file.
During –
Must stop all contact, enforcement and interest. Can request a midway review.
Ending –
Will be made aware by the debt adviser, can begin charging interest and enforcement.
If there are any further queries, please contact us on:
Email – debtrecovery@maxweb.co.uk
Telephone – 0151 526 9321
