Debt Respite Scheme (Breathing Space)
Another blow for Landlords and more choices for Tenants to abuse the system.
The Government, in its wisdom and following lobbying from various NGOs has released a new scheme with the catchy title of Debt Respite Scheme (Breathing Space) Guidance for Creditors on 23 Apr 2021 to try and assist people who find themselves in unmanageable, problem debt.
The source document cant be found at: https://www.gov.uk/government/publications/debt-respite-scheme-breathing-space-guidance/debt-respite-scheme-breathing-space-guidance-for-creditors
The new scheme - expected to be known by its short title - Breathing Space - will offer someone facing 'problem debts' the right to seek legal protection, on a temporary basis, from being chased by their creditors and the interest or penalty fees that would have been accrued during this period is frozen for the duration. Contrary to some early misinformation, Breathing Space does not remove the debt obligations of an individual it is merely designed to provide less pressured time for the individual to seek professional debt counselling help and to be able to design a recovery plan.
Lorraine Charlton - a debt expert at Citizens Advice has been quoted as saying for tenants and others likely to take advantage of Breathing Space respite:
“If you have unmanageable debts, the new scheme could give you the time to get the advice that will help, and to start taking action. Breathing Space isn’t a temporary fix to simply keep your creditors at arm’s length. You’ll need to work with your debt adviser to try and make a plan to deal with your debts.”
It's actually Not another Piece of Housing Legislation... It covers all forms of debt but as Landlords we get caught up in it.
Many landlords have expressed concern that this new scheme, combined with the current Covid19 related restrictions already in place in terms of collecting tenant arrears, means that they could lose further income but closer scrutiny of the scheme means that the rent obligation remains and it is only interest and fees during the time period as well as not being pursued by their creditors that is included.
Does the Legislation affect an Existing Notice which is in place?
If a tenant is being pursued under Section 21 Notice or non-financial grounds within a Section 8 notice then these will remain unaffected and legal proceedings should still be permitted. It is unclear at this stage if, where Breathing Space is implemented, an application for court action can still go ahead if the notice has already been submitted and a court date straddles the 2 month period permitted. The mental health grounds Breathing Space which are more open ended may have more of an impact but the number of these special cases are probably going to be very limited as the criteria to pass requirements are pretty stringent.
How much take-up of the scheme there will be and how effective it proves to be for those who do apply has yet to be seen. There is every chance that it will be another well intentioned scheme that proves to be unworkable in reality. Problem debt is expected to come more to the surface as the hoped for emergence from lockdown brings a new normal into daily life. At present, we do not see this playing a major part in a letting agent’s working week but it could be that it is more likely to apply to certain pockets within the sector and many other areas carry on as before.
Brief look at headlines of the scheme
Breathing Space is a new scheme came into force on 4 May 2021 which gives those successful applicants temporary protection from being pursued for most types of debt collection, including rent, while they take action to get on top of their debts.
Individuals must apply through a qualified registered debt adviser for their 60 days’ Breathing Space. They will be required to continue to engage with their debt adviser to create and prepare to implement a recovery plan and they are not permitted to take out any new borrowing commitment over £500 during this period
Those protected are also expected to continue to make certain types of pre-defined payments, which includes ongoing housing costs - rent payments, utility bills and any regular taxes liabilities such as PAYE.
Interest & Charges are paused during the Breathing Space period.
It is only the accruing interest and any associated fees (eg late payment fees) that will be paused on debts included in their Breathing Space period while these conditions are met.
Breathing Space can be used only once in any 12 month period unless in receipt of the mental health crisis, version which has very specific additional criteria which need to be met:
- Must be approved by a qualified mental health professional - not just a GP - will need to confirm they are receiving crisis care.
- The individual can then seek help from the scheme themselves, or if deemed not to have the capacity someone else (for example a carer, social worker or mental health nurse) could apply on their behalf but will need to apply along with para a above.
- The Breathing Space enforcement continues as long as they are receiving their crisis treatment, plus a further30 days.
- A nominated person from the mental health support will be required to keep in touch with the debt adviser to update them about their ongoing treatment.
If you have question or want to learn more about this why not chat with the team 01522503717 or email me.
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