On 4 May 2021 the Debt Respite Scheme (Breathing Space) comes into force. This important legislation means individuals can have “breathing space” from their creditors. This scheme provides citizens with new and important procedural protection when it comes to their debts, but equally it may be challenging for landlords and local councils to implement. So here is our guide on the best practices for navigating breathing space.
Who Can Have ‘Breathing Space’?
A breathing space can be obtained if:
An individual cannot (or is unlikely) to be able to repay their debts and a debt adviser considers a breathing space scenario to be appropriate. This is known as a "standard breathing space" moratorium.
Or an approved Mental Health Professional certifies that a person is receiving mental health crisis treatment. This is known as “mental health breathing space” moratorium.
How Does Breathing Space Apply?
If a local council or landlord is owed money from a citizen, they may receive notice that an individual now has the benefit of breathing space. Whilst this status is in place, councils and landlords are not permitted to pursue debt recovery via a multitude of methods, such as recovery action, communication with the debtor, or the enforcement of penalties or charges.
Citizens can apply for breathing space via a debt advisor, and if their application is successful it results in the above creditor protections being instituted for 60 days. Once the 60 day moratorium expires, the individual can make a second application but this can only be made after 12 months.
Qualifying Debts
For a debtor to obtain a breathing space the debt must be a qualifying debt. Such debts include:
credit cards;
store cards;
personal loans;
pay day loans;
overdrafts;
utility bill arrears; or
rent arrears.
Excluded Debts
Debts unlikely to be considered qualifying debts include:
secured debts;
debts incurred from fraud or fraudulent breach of trust;
liabilities to pay fines imposed by a court for an offence;
obligations from a confiscation order;
child maintenance or obligations under an order made in family court proceedings;
a crisis or budgeting loan from the social fund;
student loans;
damages they need to pay for death or personal injury caused to someone else;
advance payments of Universal Credit; or
council tax liabilities that have not yet fallen due.
Innovative Breathing Space Software
Landlords and local councils face countless logistical challenges and budgetary demands. Fortunately innovative breathing space software can manage the entirety of The Debt Respite Scheme on their behalf. The breathing space software, powered by AI and machine learning, is the strongest method to ensure that fully compliant systems and responses are in place, in order to meet the precise and detailed demands of the regulations.
Creditor Notifications and Alerts
The arrival and exit of debtors to and from a breathing space moratorium will be recorded through an Insolvency Service run central portal, which will be populated with data from debt advice providers. Creditors can be informed through this service of any arrivals and exits. These notifications and alerts are the most important puzzle piece in your breathing space compliance journey. And this data can be incorporated into your debt recovery, debt collection and breathing space software.
Lateral’s case management software for breathing space is a tried and tested solution for Councils and landlords looking to manage, understand and address issues pertaining to this regulation. If you are interested in finding our more about our breathing space case management software or receiving a demo, please email: sales@getlateral.com today!