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The COVID19-specific debtor-support measures are coming to an end. They are, however, being replaced by a combination of the established creditor-forbearance measures and the new concept of “breathing space”. Here is a quick guide to what you need to know.

Breathing space comes in two forms

There is “standard” breathing space and mental-health-crisis breathing space. The former lasts for 60 days and the latter for the length of the treatment plus 30 days. An individual can only have one standard breathing space in any 12-month period. There is, however, no limit on the number of mental-health-crisis breathing spaces a person can have.

Both forms of breathing space are only available upon referral by a debt advisor. In the case of mental-health-crisis breathing space, a carer or mental-health professional can make the application for the individual.

In either case, the individual cannot be in any sort of existing, formal debt-relief programme, such as a bankruptcy, IVA or DRO. Similarly, they cannot be subject to an interim order.

What happens in a breathing space

If a breathing space is granted, all relevant creditors will be notified and required to stop adding interest, fees, penalties and/or charges. They will also be required to stop any enforcement/recovery activity. In general, consumer debts can be included within breathing spaces.

Secured debts and debts owed to the government are excluded as is child maintenance. That said, any existing arrears on secured debts may be included in the breathing space. Council tax arrears may also qualify. Finally, breathing spaces excluded “ongoing liabilities” such as rent and bills. Essentially, these are classed as expenses rather than debts.

In a standard breathing space, the debtor will work with a debt advisor to find a path forward. In a mental-health-crisis breathing space, the priority will be to allow the individual to focus on getting the treatment they need.

After this, they have 30 days to work with a debt advisor to find a path forward. If necessary, they can use some of this time to apply for a standard breathing space. By the end of a breathing space, the debtor and the debt adviser should have found a path forward. This doesn’t have to mean insolvency but it might.

Is a breathing space the right option for you?

In principle, the more choices you have, the more likely it is that you’ll find the right option for you. In practice, the more choices you have, the more likely it is that you’ll end up very confused about which is the right one for you.

On the one hand, it’s hard to criticize the government for introducing help for debtors. On the other hand, it’s also hard to see just what, exactly, they add to the existing creditor-forbearance regulations. Realistically, therefore, most people will need to approach tackling their debts in exactly the same way as they did before these measures were introduced.

Firstly, get your paperwork in order. Work out what you owe to whom and update your records as necessary (e.g. when payments are made and/or interest is added). Secondly, track your income and outgoings. See if there’s anything you can do to increase the former and reduce the latter.

From there, you may be able to work out a plan to pay back your debts without going into any sort of formal debt-management plan (or insolvency). If you can’t (and especially if you’re contemplating insolvency), then you should make it a priority to see a debt advisor.

Free versus paid debt advisors

Free (charitable) debt advisors offer as good a service as paid debt advisors. The only difference is that paying for advice may get you a quicker service. This could be particularly relevant at the moment as the impact of COVID19 continues to be felt.

Please contact us for any more information.

Blackpool: 01253 299 399 | Carlisle: 01228 558 899