Breathing Space Debt Moratoriums
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Last updated 4 May - Universal Credit and legacy benefits, links to gov.uk guidance around applications to court.
Coming into force from May 4 2021, the Debt Respite Scheme (Breathing Space) allows people in England and Wales with unsustainable debts to arrange to enter a ‘breathing space’.
Once someone enters a breathing space their creditors are not allowed to contact them directly to request payment of the debt, or take enforcement action to recover the debt (including by taking possession of a property) while the breathing space is ongoing.
This is designed to provide people in debt with enough time to find a solution for their financial problems.
While this legislation is aimed primarily at large lenders such as banks, the obligations apply to any creditor, including landlords. In particular, landlords who are seeking possession because of rent arrears will need to be aware of these restrictions as it can cause issues for Section 8 proceedings.
The guidance below is aimed at familiarising landlords with this new legislation. In it we discuss how to comply and some best practice tips for mitigating the financial risks.
The aims of breathing space
Breathing space is designed to provide people in unsustainable debt with a route out of debt. They do this by giving them access to a qualified debt advisor to help them arrange their finances and talk to their creditors. During this time, their creditors are also prevented from taking enforcement action against the debt, giving them time to arrange for a suitable payment plan to be put in place.
At the end of a standard breathing space, this should mean that both the debtor and the creditor are in a better position, as a debt repayment plan should be in place in most cases and the a tenancy is in a better position to be sustained. Particularly given most landlords never manage to recover debts owed after a tenant leaves a property.
The different types of breathing space
There are two types of breathing space that a tenant may enter into: a standard breathing space and a mental health crisis breathing space.
For the most part, both types of breathing space operate in the same way. Creditors are prevented from taking steps to recover debt for the duration of the breathing space. However, the duration and frequency of the breathing spaces, as well as who can make the application will vary.
Who can apply for a breathing space?
The remainder of this page is available exclusively to members of the NRLA.
It contains information on:
- what you can and cannot do during a breathing space
- how it affects possession proceedings
- best practice to protect your interests
- challenging a breathing space
- how joint tenancies are affected by breathing space