Government guidance for creditors on debt ‘Breathing Space’ Regulations
The Government has published guidance for creditors (which includes local authorities enforcing parking and traffic penalties) to accompany new regulations being introduced from 4 May that will provide those with problem debt the right to ‘breathing space’ from creditor action.
The Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 will provide for up to a 60-day period of protection from interest, fees and charges for those in debt. Debtors can only access a breathing space by seeking advice from a debt adviser.
The regulations define two types of breathing space: a standard breathing space and a mental health crisis breathing space (for those receiving mental health crisis treatment).
The guidance for creditors>>, published by the Department for Business, Energy and Industrial Strategy’s Insolvency Service, provides an overview of how a breathing space can be applied for and started by someone in debt, and informs creditors of their responsibility to stop all action related to a debt and apply protections (see below), should they be informed that it is subject to a breathing space. For applicable debts, creditors must stop:
- the debtor having to pay certain interest, fees, penalties or charges for that debt during the breathing space
- any enforcement or recovery action to recover that debt, by them or any agent they’ve appointed
- contacting the debtor to request repayment of that debt, unless they’ve got permission from a court.
The guidance also covers contact and engagement between creditors and those in debt / advisors during a breathing space, the circumstances around a breathing space being reviewed or cancelled, as well as the next steps after a breathing space has ended.