Debt Respite Scheme - a breathing space for those in debt

The Government made a manifesto commitment in 2017 to introduce a new Debt Respite Scheme consisting of two elements - a breathing space moratorium and a statutory debt repayment plan.

The Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 (SI 2020/1311), commonly referred to as “the Breathing Space Regulations”, were made on 17 November 2020 and came into force on 4 May 2021. The Regulations provide eligible individual debtors with problem debt a period of protection from their creditors known as a “breathing space moratorium”. The aim is to give people the time to access professional debt advice, without the stress caused by spiralling debt and impending enforcement action. However, payment of all “ongoing liabilities” must continue during this time.

There are two types of moratorium: a standard breathing space and a mental health crisis breathing space. A standard breathing space moratorium is available to eligible debtors seeking professional debt advice (which may be provided in person, on the phone or electronically). The moratorium gives them legal protections from creditor action for up to 60 days. The protections include pausing most enforcement action and contact from creditors, and freezing most interest, fees, and penalties on their debts. A mental health crisis breathing space moratorium is only available to someone who is receiving mental health crisis treatment and it has some stronger protections. This breathing space lasts for as long as the person's mental health crisis treatment, plus 30 days (no matter how long the crisis treatment lasts).

An individual can only access a standard breathing space moratorium after being assessed as eligible by a debt advice provider. The Breathing Space Regulations impose an obligation on creditors to comply with the restrictions and protections imposed by the moratorium.

The Government has yet to set a date for the implementation of the statutory debt repayment plan. A statutory debt repayment plan would enable a person in financial difficulty to enter a statutory agreement to repay their debts under a manageable timetable with protection from creditor enforcement action.

This Research Briefing provides a summary of the background to the Breathing Space Regulations. It also provides a detailed explanation of how the breathing space moratorium will work in practice. It should be noted that the new Regulations only apply to England and Wales. The current Scottish Debt Arrangement Scheme already provides debtors with a short breathing space and statutory repayment plan.