6. Breathing Space explained:

Now you’ve completed your budget and know where you stand with your money each month, you may want to consider whether some ‘Breathing Space’ could help you decide what the next steps are for dealing with your debts.

We’ve explained what Breathing Space (also known as The Debt Respite Scheme or Breathing Space moratorium) is and how you might benefit from it below.

If you read this and decide that you are interested in applying for Breathing Space, please call us on 0800 917 7821 and we’ll be happy to arrange it for you.

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

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. This lasts for as long as any mental health treatment does plus an additional 30 days after the treatment has finished

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 do I need to consider?

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) relating to the debts in Breathing Space 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 do miss a payment, this 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 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.

Once you have made your decision about Breathing Space, please continue to follow the guide to either set up a Repayment Arrangement with your creditors on the next step, or consider some of the other debt solutions within this guide.