Breathing Space explained

If you are struggling with problem debt, you may be able to benefit from Breathing Space (also known as The Debt Respite Scheme or Breathing Space moratorium) to give you space and time to work out how to deal with them.

We have explained how Breathing Space works below and if our advisers think you may benefit from it, they will discuss it with you when you get in touch for debt advice either online or by calling us on 0800 280 2816.

• What is Breathing Space?
• Who is Breathing Space for?
• How does Breathing Space work?
• What are the benefits and things to be aware of?
• Breathing Space in summary
• Breathing Space FAQs

What is Breathing Space?

Breathing Space is a 60-day period, during which time your creditors will stop contacting you about your debts, allowing you time to work out how you can deal with them.

This means that you won’t receive letters or phone calls from your creditors demanding payments, the interest and charges on your outstanding balances will be frozen and any legal action currently against you will be suspended.

During this time, you should seek professional help with your debts from a company such as PayPlan, to ensure you have a plan in place for when the breathing space period ends.

For anyone with a diagnosed mental health condition, there is an extended Breathing Space which is called Mental Health Crisis Breathing Space and lasts for as long as any treatment does plus an additional 30 days. This can only be arranged if an Approved Mental Health Professional certifies that you are receiving mental health crisis treatment.

Who is Breathing Space for?

Breathing Space is intended for anyone who is struggling with problem debt and needs legal protection from creditors for things such as bailiff action or eviction proceedings. It will also help anyone who cannot keep on top of their debt repayments due to interest and charges.

It might not be the right option if you are able to repay your debts with some budgeting help or if you have savings or any assets, such as a car, that could be sold to pay the debt. It also probably wouldn’t be suitable if you are able to put a plan into place sooner to deal with your debts, and aren’t at risk of enforcement action.

You’ll be able to talk all of this through with an adviser when you are looking at the options available to you.

How does Breathing Space work?

Once you contact an advice agency for help with your debts, your adviser will talk to you about Breathing Space if they feel it would be of benefit to you. They will explain the ways in which it can help you and also the potential risks to your credit rating, as well as the things you will be expected to do.

Once you’ve agreed that you would benefit from Breathing Space, your adviser will check the Breathing Space register to check you haven’t used it in the last 12 months. If you haven’t, they will use an electronic service to send a message to all of your creditors, explaining that you have requested Breathing Space, so they can apply the relevant protections.

They will only request Breathing Space for the debts you have told them about; and any other debts incurred whilst you’re on Breathing Space, will not be included.

Your Breathing Space starts the day after your details are put onto the register and this will be confirmed in an email to you.

Does Breathing Space mean I can stop paying my debts?

Breathing space isn’t a payment holiday. Interest and charges on your debts will be frozen and your creditors won’t be able to take legal action – but you will be expected to keep up with your payments, as your debt will still be outstanding. However, if you’re struggling to make these payments, please speak to your adviser who will let you know what your options are in this situation.

Midway through your breathing space, you will be expected to have a review. This will allow your debt adviser to check that using Breathing Space is still appropriate for you.

They will make sure that you are keeping to the terms of the agreement by not taking out further credit and are looking at suitable debt solutions for when the Breathing Space has ended. Your adviser will also check that you’re keeping up with your priority bills such as mortgage or rent, tax and utility bills. If you don’t complete your midway review, Breathing Space can be cancelled.

After the 60 days has ended, your Breathing Space will automatically end. At this point, your creditors can start applying interest and charges and can resume any legal action to chase the debts, although time limits to take legal action are extended by 8 weeks. It’s very important to have a plan in place for how you are going to deal with your debts at this point.

What are the benefits and things to be aware of?

Benefits:

• You won’t be contacted by your creditors to ask for payment of your debts.
• All interest, charges and fees will be frozen for the 60-day period.
• Any enforcement action such as bailiff visits, planned evictions and legal action such as County Court Judgements (CCJs) will be temporarily suspended.

Things to be aware of:

• It will be your responsibility to ensure the information you provide about your debts is correct, and you cannot withhold any details.
• After Breathing Space ends, you will still owe your debts and you need to ensure you have a debt plan or solution in place.
• You will be expected to continue making your regular payments to your unsecured debts as well as your priority bills (mortgage/rent, council tax, utilities etc).
• If you make a reduced payment, or miss one altogether, it could be recorded on your credit file and it could have an impact on your ability to borrow credit in the future.
• Even if you continue making your payments, the fact that you’ve had Breathing Space will be recorded on the Breathing Space register and could potentially impact future lending decisions.
• If you put an overdraft or credit card debt into Breathing Space, some lenders may prevent you using this form of credit throughout this period.
• If you put a joint debt into Breathing Space, the protections will extend to the other person named on the debt. However, you should make the other person aware because it could affect their ability to use that account or card, they will still be responsible for the debt and it could also impact their credit score.
• If you put a guarantor debt into Breathing Space, the protection won’t extend to the guarantor so creditors can still contact them and request payments. However, the guarantor can apply for their own Breathing Space, if eligible.
• If you are behind on your mortgage and you put the mortgage arrears into Breathing Space, your account will be flagged to show the mortgage is impaired. This could affect your choice of mortgage product when your current agreement comes to an end.
• Some debts (such as secured loans and child maintenance) cannot be included in Breathing Space. This means that you are not protected from legal action as a result of these debts.
• You will be expected to do a review midway through Breathing Space, and if you don’t do this, it could be cancelled.
• Creditors can request a review at any time, and if they’re not happy with the outcome, they can escalate it to court.
• You can’t take additional credit over £500 whilst in Breathing Space.
• Your information will be held on the Breathing Space register for 15 months from the point the breathing space has ended.
• You can only use one breathing space session in a 12-month period.

Breathing Space in summary:

• 60-day period, to allow you to deal with your debts
• Interest, fees and charges will be frozen
• Creditor contact will stop, and legal action suspended
• Payments towards your debts should continue throughout breathing space
• Must be arranged through a qualified debt adviser
• Can be used for unsecured debts, like credit cards, loans and some government debts
• Cannot be used more than once in a 12-month period
• Mid-way review will happen between 25-35 days
• Creditor contact and legal action can start again at the end of the 60 days

Breathing Space FAQS:

What is Mental Health Crisis Breathing Space?

Mental Health Crisis Breathing Space is for anyone who is struggling with problem debt and has the additional burden of mental illness. It offers the same protections as Breathing Space by freezing any interest, fees and charges and temporarily suspends any creditor action against you. The difference is that this protection lasts for as long as it takes for your mental health treatment to be finished, plus an additional 30 days after the treatment has been completed.

To get this type of Breathing Space, you’ll need to be assessed by an Approved Mental Health Professional (AMHP) who will certify (sign off) that you’re having a mental health crisis and are receiving treatment for it. They will need to get in touch directly with an advice provider who specialises in Mental Health Breathing Space (PayPlan are not able to set this Breathing Space up).

What debts can be included in Breathing Space?

Most of your unsecured debts are likely to be qualifying debts. These include:

• credit cards
• store cards
• personal loans
• payday loans
• overdrafts
• arrears on utility bills (this means you are behind on these bills)

Government debts like tax and benefit debts are all likely to qualify unless they are included in the list of excluded debts below.

What debts can’t be included in Breathing Space?

All personal debts qualify for Breathing Space protections, except for:

• Secured debts (like mortgages, hire purchase or conditional sale agreements). You can only include arrears on these debts that exist at the date of an application for a Breathing Space. Any new secured debt arrears that happen after the Breathing Space starts are not protected. You should also continue to pay any ongoing liabilities– if you miss a payment, Breathing Space could be stopped.
• Debts incurred because of fraud.
• Fines imposed by a court for an offence. This includes any interest on the fine and any penalties or charges connected to it. This would not include penalty charge notices, like a parking ticket.
• Obligations from a confiscation order
• Child maintenance or obligations under an order made in court proceedings
• A crisis or budgeting loan from the social fund
• Student loans
• Damages you need to pay for the death or personal injury caused to someone else
• Advance payments of Universal Credit
• Council tax payments that have not yet fallen due. Any council tax bills that have fallen due, but you haven’t paid, are qualifying debts.
• Any additional debts that you take out during Breathing Space cannot be included.

What will happen with joint debts?

Joint debts, like arrears on a joint mortgage or rent arrears on joint tenancies, can be included in Breathing Space, even if your partner doesn’t go into the scheme. The joint debt would become a Breathing Space debt, and the same protections apply to both of you. You would need to make the other person aware because it could impact their ability to use the account or card. The Breathing Space does not apply to the other person’s debts and liabilities in their own names.

Can guarantor debts be included?

Guarantor loans can be included in Breathing Space, but the protections do not extend to the guarantor so they can still legally be chased for payment. The guarantor can apply for their own Breathing Space, if they’re eligible.

Does Breathing Space mean I can stop paying my debts for 60 days?

No – Breathing Space isn’t a payment holiday, so you’ll still need to carry on making payments on your debts while you’re in it. Your lenders will still expect you to continue any repayments you’re currently making, but they won’t be able to take any enforcement action against you during the 60-day period.