The Debt Respite (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 came into effect on 4th May 2021.It aims to give legal protection to individual in debt from creditors for a period of time.
In order to be awarded a breathing space the individual must contact a debt advice service authorised by the Local Authority or the Financial Conduct Authority. The debt advice service must be satisfied that the individual cannot pay the debt as it falls due and would benefit from a debt solution. The debt advice service is responsible for the administration of the moratorium including being the point of contact between the creditors, individual and the Insolvency Service. The Insolvency Service are responsible for informing the creditors via an electronic portal, email or post about the individual's moratorium. Once informed creditors must halt all enforcement action regarding the debt, stop all contact regarding the debt and if court action has been commenced advise the court in writing.
There are two breathing space periods available.
- 60 days breathing space moratorium.
- Mental health crisis treatment moratorium which is for the length of the treatment plus 30 days. The individual does not have to access debt advice first but evidence is needed from an approved mental health professional for a debts advice provider to start a moratorium.
Personal debts, such as arrears, are likely to be qualifying debts including joint debts even if only one individual applies.
Implications for Landlords
The regulations require all landlords to pause arrears action when they are notified by the Insolvency Service that that arrears (debt) owed is subject to a breathing space. This includes:
- Arrears letters and statements of the arrears
- Texts or email regarding the arrear
- Appointments or conversations
- Meetings regarding the arrear
If the resident is subject to third party deduction the DWP must be advised that the direct deduction for the arrear must be stopped for the duration of the breathing period using a template. The regulations do not apply to Universal Credit where third party deductions can continue. The DWP must be contacted at the end of the breathing period moratorium to restart the deductions and will review these at this stage.
The moratorium does not extend to current rent payments which must be made and residents should be advised that failure to pay may result in the moratorium being cancelled.
If possession proceedings have been commenced the court must be advised in writing about the moratorium.