The government has set out details of its new Debt Respite Scheme – also known as Breathing Space – which comes into effect in May. But what is it and what does it mean?
Effectively this will give tenants that are in “problem debt” protection by law from being “chased up” for any outstanding debt from their landlord or letting agent.
According to the information listed on the Government website there will be 2 types of breathing space: –
Standard breathing space
This will see any enforcement action from creditors halted for 60 days and all interest will be frozen for those with “problem debt”.
During this 60-day period individuals will receive professional debt advice and help to find a long-term solution.
2. Mental health crisis breathing space
Individuals receiving mental health crisis treatment will also be awarded the same protection until their treatment has been completed.
The Government has reported that this will help over 700,000 people across the UK to receive professional help in the first year of the scheme, increasing to 1.2 million every year by its 10th anniversary.
Individuals can access the standard breathing space only via an approved debt advisor which should be registered with the financial conduct authority or via a local authority if it is approved to offer this service.
In the case of Mental health, then the individual must be certified as being in mental health crisis treatment.
This means that as a landlord or letting agent if you are told that any debt owed to you is in “breathing space” you must stop all actions relating to that debt and not pursue it until the “breathing space” timeframe ends.
This will be monitored via an electronic service which will send you a notification to inform you of each debt that is in breathing space with the start date.
If you receive notification that one of your tenants needs breathing space, then you need to ensure that you apply the protection measure as outlined in the guidance.
|What are ‘protection measures’?
When you receive a notification of breathing space you will need to identify from your records the debt owed to you by the debtor. You will be required to do this as soon as possible and report back to the appointed debt advisor.
You must then make sure that you stop any interest payments on the debt, stop any additional fees, penalties, or charges for that debt during the breathing space period.
You must stop any enforcement or recovery action to recover that debt, or any agent that you have appointed.
You must stop any contact with the debtor requesting payment of that debt unless you have permission from the court to do so.
Interest can still be charged on the principal debt but not on the arrears.
Generally, during breathing space, you or any agent appointed by you must not contact the debtor to discuss any collection or enforcement action. This includes asking them to pay or starting or continuing any legal action.
Breathing space should not be mistaken with a “payment holiday” – it is not. Whilst you cannot enforce a breathing space debt during the breathing space time period, you can continue to accept any payment made from the debtor of their own free will.
A standard breathing space will end 60 days from the day it started or the day after a debt advisor or court cancels it. Or if the debtor dies during the breathing space period, in this case the breathing space ends on the day after the debtor dies.
As always, we will keep you informed on how this rolls out and what steps you need to take. Please sign up to our blog so you do not miss out!