The Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 which comes into force on the 2 May 2021, will give individuals that are in debt the right to legal protections from their creditors.
How can Debtors Obtain the Breathing Space?
A debtor must apply for debt counselling through an advisor who is authorised by the Financial Conduct Authority. The pre-requisites that must be satisfied are that the Debtor:
- Is an individual living in England and Wales;
- Owes a ‘qualifying debt’ to a creditor;
- Does not have a debt relief order or an individual voluntary arrangement or be an undischarged bankrupt;
- Must not have had ‘breathing space’ in the previous 12 months.
What is a ‘Qualifying Debt’?
Most debts are likely to be qualifying debts. These will include:
- credit cards
- store cards
- personal loans
- pay day loans
- utility bill arrears
Some examples of debts that will not qualify are:
- secured debts (like mortgages)
- student loans
- council tax liability which have not yet fallen due
What is the Effect of the ‘Moratorium’?
The idea behind this is to give debtors ‘breathing space’ in order to enable them to obtain professional advice on finding a solution to their financial problems. The ‘breathing space moratorium’ lasts for up to 60 days and once triggered, the creditor will not be able to take any action in respect of the debt. Alternatively, the ‘mental health crisis moratorium’ will assist those individuals receiving mental health treatment and will last for the duration of their treatment plus an additional 30 days.
If a creditor has already taken steps to commence proceedings or enforce the debt, those steps must be placed on hold.
If you wish to obtain further information on how the ‘breathing space’ will affect you, please contact Anas Shah on 0161 833 5692 to discuss further.