If you’re falling behind with your debt and the stress and worry is getting too much, you might be eligible for the Government’s Breathing Space scheme. Find out more with our quick guide to Debt Respite
What is the Breathing Space scheme?
The Breathing Space scheme, officially known as the Debt Respite scheme, is a free government initiative designed to give you the time you need to find a debt management solution if you’re struggling to keep up with your repayments. It’s not a payment holiday and you will need to keep paying back your debts, but Breathing Space will give you 60 days where you won’t need to worry about any additional interest, fees, or court action from your creditors.
The scheme was launched on 4th May 2021 and is intended to relieve some of the stress and pressure that can build when you feel your debts are in danger of spiralling out of control. When you’re worrying about making payments while also dealing with mounting interest and threats of further action, it’s easy to feel too overwhelmed to take control of your debt. The Breathing Space scheme can give you the time you need to seek debt advice and set up a solution that’s right for you and your circumstances.
What are the benefits of the Breathing Space scheme?
The Breathing Space scheme is best suited to people who are falling behind with their repayments and need time to explore other options that can help them pay off their debts in the long-term. It’s unlikely that you’ll be eligible if you can still comfortably afford your debt payments. Instead, it’s an opportunity to relieve some of the pressure and seek qualified debt advice that can help to improve your situation over time.
Worried about your credit report? Assuming you keep up with regular payments like your rent or mortgage, utility bills, and taxes, the debt respite scheme won’t be listed on your credit file and so may affect your score less than simply ignoring the problem.
Am I eligible for the Breathing Space scheme?
The Breathing Space scheme is currently only available in England and Wales and there are a few terms and conditions you’ll need to meet to be eligible for debt respite scheme advice.
To qualify, you must have at least one eligible debt, but don’t worry; most types of personal debt count including credit and store cards, personal loans, payday loans, overdrafts, council tax arrears, and mortgage and rent arrears. However, there are a few types of debt that aren’t eligible like secured debts, debt incurred due to fraud, court fines, student loans, child maintenance payments, and any new debts that start during your Breathing Space term.
You can only enter the Breathing Space scheme once in any 12-month period and you must not have a debt management solution in place already – that means you can’t have a debt relief order, individual voluntary arrangement (IVA), be subject to an interim order, or be an undischarged bankrupt.
Apply for Breathing Space through a debt adviser online or on the phone. They’ll be able to provide confidential debt respite scheme advice but might charge a fee for their services.
What happens after the Breathing Space scheme ends and will it affect my credit score?
Your Breathing Space will last for 60 days but your debt adviser will likely conduct a review halfway through to make sure that you’re following their advice and adhering to the rules of the scheme. If your circumstances have changed, you should let them know straightaway.
Once your 60 days are up, your protections will come to an end and your creditors can start adding interest, fees, and penalties to your outstanding debt again. They can also resume or start legal proceedings and take further action to enforce the debt. That’s why it’s important that you use Breathing Space to explore debt management options that can help you get back to a stable financial position.
You should keep making your repayments throughout the debt respite scheme but if you’ve fallen behind and missed payments, this can affect your credit score. The Breathing Space scheme itself won’t be listed on your credit report and credit reference agencies won’t be informed. However, your individual creditors will be told, and they might include it in their records, which could impact your ability to secure another loan from them in the future.
Are you ready to explore your debt solution options? Our friendly debt advisers are here to help you make an informed choice. Find out more by calling us on 0161 8260 585 or send us an email here
