New scheme launched to give people in debt ‘breathing space’

Breathing Space is a new scheme announced on 4 May which gives legal protection to those facing financial difficulties for 60 days to allow individuals to receive professional debt advice and seek crisis treatment for mental health.

Interest and penalty charges will be frozen for 60 days and any enforcement action paused although the scheme, which is accessed through professional debt advisers, is not a payment holiday.

The Scheme aims to assist individuals who are struggling with debt, including rent arrears, to help better manage finances, seek advice and reach a workable outcome.  

The Regulations create two new types of insolvency procedure: the breathing space moratorium and mental health crisis moratorium. The effect of such moratorium is to pause enforcement action from creditors, such as letting agents and landlords, and freezing charges, fees and certain interest on qualifying debts while the moratorium is in force. 

During the moratorium a creditor or their agent may not do any of the following:
Require the debtor to pay interest that accrues on a moratorium debt during the moratorium period.
Require a debtor to pay fees, penalties or charges in respect of a moratorium debt that accrue during the moratorium period.
Take enforcement action in respect of a moratorium debt.
Enforcement action includes; taking a step to collect a moratorium debt from a debtor, taking a step to enforce a judgment or order regarding a moratorium debt, obtaining a warrant, selling or taking control of a debtor’s property or goods, bringing legal proceedings against a debtor relating to non-payment of a moratorium debt, disconnecting the debtor’s gas/electricity or serving a possession notice based on rent arrears or ‘taking possession having served such a notice’ and contacting a debtor for the purpose of enforcement of a moratorium debt. The Regulations also prevent a creditor from taking any of the prohibited steps in relation to a joint debtor. A moratorium may delay possession proceedings which are based on rent arrears.

Posted on 05/06/2021 by Ortolan

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