Big Issue Vendor

What is the breathing space scheme? How can it help you if you’re in debt?

The new Breathing Space and Mental Health Crisis Debt Respite Scheme came into force on May 4 and could help up to 700,000 people per year with their debts
The breathing space scheme is intended to give people the chance to plot their path out of debt. Image credit: Dylan Gillis/Unsplash

The Covid-19 pandemic has hit plenty of people hard through job losses and slashed incomes. But the government’s new debt respite programme, known as the breathing space scheme, is set to help people from becoming trapped in problem debt.

A number of charities have been calling for the breathing space scheme over the last decade and the UK Government announced it would be brought into law back in 2019.

Last year, the Treasury estimated the new scheme could benefit up to 700,000 people in its first year, rising to more than a million people within a decade. The government department also said 25,000 to 50,000 people in mental health crisis treatment are expected to benefit from breathing space every year.

Since then, the impact of Covid-19 has driven more people into problem debt – from 1.7 to 2.4 million according to StepChange – so the scheme has the potential to help even more people during the economic recovery to come

But how does the scheme work? Let The Big Issue explain.

What is the breathing space scheme?

The Breathing Space and Mental Health Crisis Debt Respite Scheme came into force on May 4 2021 in England and Wales, giving people the ability to take a pause on their debt payments and further penalties such as interest, fees and new enforcement action. 

The scheme is designed to help people get on top of the debt issues they face, to ensure they can plot a path out of debt and to reduce the impact on mental health.

The idea is this makes it easier for someone who is struggling financially to find a sustainable solution to their debts without facing the pressure of meeting new costs or dealing with debt collectors. Without having to face new charges, there is less pressure to take on new debts to cover them.

Article continues below

Current vacancies...

Search jobs

Debt charity StepChange said six in 10 of their clients ended up with even more debt without protection to pay off with existing arrears.

StepChange first called for a breathing space scheme to be introduced in 2014. StepChange chief executive Phil Andrew, called the scheme a “landmark piece of legislation” and insisted that it has “real potential” to help people trapped in debt to turn their lives around.

This the first time statutory protection has been in place to pause action on debts in this way.

How can you start a breathing space?

First you need to see if you are eligible. To qualify you must be living in England and Wales and you must owe at least one qualifying debt to a creditor. Qualifying debts can include credit cards, personal loans or overdrafts as well as rent, fuel or council tax arrears.

However, you can’t apply for breathing space if you have been on a debt relief order, have an individual voluntary arrangement or are still subject to undischarged bankruptcy restrictions. Being subject to an interim order – which forces creditors to stop legal action for the enforcement of unsecured debts – can also rule you out of the breathing space scheme.

Not all debts are included in the scheme. A breathing space cannot be sought for court fines, universal credit advance payments and student loans while secured debts like mortgages or car finance also won’t be covered unless you are in arrears.

You can also only apply for the 60-day scheme once in a 12-month period. Applications need to be through a debt adviser.

Joanna Elson, chief executive of the Money Advice Trust – the charity behind the National Debtline, said she hopes that the scheme will encourage people to seek help when they find themselves falling into problem debt.

“Breathing space will provide a powerful incentive for people in debt to seek free debt advice – with vital protections from interest, charges and creditor action to give people the time and space they need to begin to deal with their financial difficulty,” said Elson.

“Free debt advice has never been more important than in helping households to recover from the impact of Covid-19 – and the breathing space scheme will strengthen our ability to help people at this crucial time. We look forward to playing our role in making the scheme a success.”

Are there other types of breathing space?

There is a separate breathing space scheme if you’re being treated for a mental health crisis.

In this case, you can apply for a mental health breathing space more than once in a 12-month period but you will need an approved mental health professional to confirm you are receiving crisis care. This cannot come from a GP but they can refer you to a mental health professional.

Once this confirmation is received, either you or someone else on your behalf can apply for the breathing space scheme.

The pause lasts for longer under this scheme – for however long you are under crisis treatment plus 30 days after it has concluded.

Financial expert Martin Lewis, chair and founder of the Money and Mental Health Policy Institute, campaigned on the need for the scheme to help people in mental health crisis.

As the new scheme came into force, he said: “I’m especially thrilled that our Money and Mental Health Policy Institute suggestion for recovery space is coming into fruition as part of this. That means from now on, everyone receiving NHS crisis care for their mental health can recover without being hassled for escalating debt, fees and charges.”

As the new scheme came into force, he said: “I’m especially thrilled that our Money and Mental Health Policy Institute suggestion for recovery space is coming into fruition as part of this. That means from now on, everyone receiving NHS crisis care for their mental health can recover without being hassled for escalating debt, fees and charges.”

As well as being able to apply for this type of breathing space more than once per year, you can also apply for the standard breathing space scheme once it has finished.

What to do during a breathing space?

It is imperative that you continue to work with your debt adviser throughout the breathing space period and you must not take out any new borrowing over £500 during that time.

Interest and fees will be paused on debts including in the breathing space scheme during the period but you will still have to pay for housing costs, utility bills, and taxes during that time.

This time should then be used to work out a debt repayment plan with your debt advisor.

What are creditors’ responsibilities?

Creditors will be given an electronic notification of when a debt is in a breathing space and it is then their responsibility to immediately provide protections until the scheme ends.

Debts might also be added to a breathing space at a later date if they are identified after the breathing space has started, in which case protections must be applied from the date of the notification or when regulations have considered the creditor to have received it, whichever is earliest. 

What do experts say about the breathing space scheme?

Debt charities including StepChange, the Money and Mental Health Policy Institute (MMHPI) and Citizens Advice have long-requested the introduction of the breathing space scheme.

When it was first announced that the scheme would come into force back in 2019, MMHPI’s chief executive Helen Undy insisted: “This scheme could genuinely save lives.”

Now the scheme has arrived in 2021, StepChange has called the breathing space scheme “the first pieces in the jigsaw of protections for people in problem debt.

The charity is campaigning for statutory debt repayment plans to follow to allow people trapped in debt to pay them off with further protection against charges, interest and enforcement action once they have come out of a breathing space.

But, for now, the new scheme underlines the need for people to ask for assistance with debt problems.

“As ever, our advice to anyone struggling with debt is to seek help as soon as possible.” said StepChange chief executive Phil Andrew.

“Breathing space will help to reduce the pressure of a stressful debt situation, allowing people to focus on engaging fully with advice. This is the first step towards regaining control of your finances and plotting a sustainable route out of debt.”

Lorraine Charlton, debt expert at Citizens Advice, said that the breathing space scheme has become more vital in the wake of the Covid-19 pandemic.

“With temporary protections on debt coming to an end, we’re worried that the real struggle will soon begin for many,” she said.

“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.

“For anyone who feels they can’t manage their debt, the most important thing is to seek help as soon as possible from a free and impartial debt advice charity like Citizens Advice.”

John Glen, economic secretary to the Treasury, said the breathing space scheme shows that the Westminster government is “determined to tackle problem debt”.