The Debt Respite Scheme (Breathing Space Moratorium) new rules and what it means for Creditors
The Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) Regulations 2020 comes into force on 4 May 2021. Let’s look into what it means for you as a creditor recovering monies from a Debtor?
Who can apply for the Debt Respite Scheme?
- Any individual can apply for help if they owe a qualifying debt (see below) to a Creditor and are based in England or Wales;
- The individual’s debt or debts will be assessed by a Debt Advisor to see if the Debtor can pay any of their debts back and if a Moratorium would be appropriate; and,
- A Sole Trader can include some business debts if those debts relate to him/her personally.
Who qualifies for assistance under the Mental Health Breathing Scheme?
- The same criteria above applies plus if the Debtor is/ has had mental health crisis treatment or has had treatment in the last 12 months.
- An application may be submitted by the Debtor’s Health Care Professional or Social Worker and must include evidence of the current treatment the Debtor is receiving.
What are “Qualifying Debts”?
- Most Debts for any sums are included such as credit cards, judgments, rental arrears, utility bill arrears and loans; and,
- Government Debts that have become due and owing.
What about current or ongoing liabilities
- The Debtor should continue to pay these as normal such as rent, mortgage, utilities, loan payments and taxes.
- Should the Debtor not pay these the Debt Advisor may stop the Moratorium.
What debts are excluded?
- Secured debts and loans;
- Debts that relate to Fraud or breach of trust;
- Any new Debts – the Scheme only relates to outstanding debts;
- Liabilities for fines that are imposed by Court such as a Parking Ticket or driving;
- Child maintenance or student loans
- If a business is run as a Partnership or is VAT registered;
What does it mean if you have a Qualifying Debt as a Creditor?
- Stop any enforcement action or legal action against the Debtor by you or your agents;
- Let the court know if there is an ongoing legal proceedings;
- Stop calculating interest on the outstanding debt;
- Prevented from asking the Debtor to pay the Debt;
- Serve a notice on the Debtor that they are going to be evicted from their property due to rental arrears; and,
- Limitation on any claims that might have ended will be extended for 8 weeks after the Scheme has ended.
- More seriously any action you take against a Debtor after being notified will be null and void and may mean you are liable to pay the Debtor’s costs.
How will you know or be notified of the Scheme?
The Debt Advisor will input any debts on an electronic Register and Creditors will either receive an email or a letter informing them that the Debtor has been granted a Moratorium.
How long does a Moratorium last?
- 60 days after it starts; and,
- 30 days after the Debtor’s treatment has finished.
Can you object to the Moratorium?
Yes any Creditor can request a Moratorium to be reviewed by a Debt Advisor if they believe that the Debtor has funds to pay the debt, the Debt is not eligible as a Qualifying Debt or it would unfairly prejudice your interests. This can be applied up to 20 days after receiving notification. If you still do not agree with a Debt Advisor then you can apply to Court for it to be cancelled within 50 days or being notified.
The Debt Collection Centre is run by Devonshires Solicitors LLP a National Law Firm. We are ranked as one of the best in London for Debt Recovery as seen in the Legal 500 directory. We provide an efficient and effective service enabling our clients to focus on the running of their own business. We have a strong reputation of recovering money when debts have been disputed or the debtor remains unresponsive.