Debt Respite Scheme – is it for you?

 

The Debt Respite Scheme launched on 4th May 2021 and it’s a consideration if you are struggling with debt.

What is the Debt Respite Scheme?

It is a support scheme set up by the government where people struggling with debt can apply for a breathing space period which typically lasts for 60 days i.e., where it is a standard breathing space.

There is another form of breathing space for those who are suffering from a mental health crisis and are receiving treatment for it. In both instances, the breathing space is a temporary measure whereby borrowers can get protection from creditor enforcement, such as by freezing interest and charges during the breathing space.

Is it easy to apply for?

For those who wish to apply, they must work with a professional debt adviser who must be authorised by the Financial Conduct Authority (FCA). The debt adviser will determine whether a breathing space is suitable and if so, an application is made on your behalf. The respite scheme is only for a temporary period, your debts do not go away at the end of it – that problem will still need to be dealt with.

Following the start of a standard breathing space, you must then review debt solutions or continue with setting up a debt solution where one was identified beforehand. Those subject to a mental health breathing space are not obligated to do this.

Here is some information about debt solutions available to residents of England, Wales, and Northern Ireland.

How long does the breathing space last for?

There is the standard scheme which allows up to 60 days of respite and a scheme available to those who are suffering from mental health crisis and are receiving treatment for it. The duration of this form of breathing space lasts for as long as the crisis treatment does, plus an additional 30 days and includes additional protections.

At UKDS, we understand the impact that having problem debts can have on mental health and may very well contribute to a crisis, so this part of the scheme is very much welcomed.

What debts are included in the debt respite scheme?

Not all debts can be included so you need to ensure that you know which ones are. Your Debt Adviser will inform you of this when assessing whether a breathing space is suitable. We have included some examples:

Qualifying debts include:

• Credit cards
• Personal loans
• Overdrafts
• Store cards
• Utility bill arrears
• Mortgage or rent arrears
• Joint debts

What cannot be included in the debt respite scheme?

• Debts incurred after the breathing space started
• Secured debt
• Debts from fraudulent activity
• Court fines
• Child maintenance debts
• Student loans
• Confiscation order debts
• Budgeting loans
• Council tax debts
• Personal injury damages
• Those who are currently subject to an IVA, a DRO or have filed for bankruptcy

What next?

Whilst the Debt Respite Scheme is a positive step for the government to take to help millions of people in financial trouble, it is only a temporary solution. Your problem debts do not go away. If you have set up a standard breathing space, you will need to find and set up a debt solution (formal or informal) during that time. Debt does not go away unless you tackle it. If you do not, the breathing space may be cancelled before the 60 day period ends and your creditors can take action.

How can we help?

We know that facing problem debt can be a daunting situation to be in.

Here at UKDS, our experienced advisers can discuss the options that are available to you. We specialise in providing IVA’s however if this is not suitable, we can point you in the right direction.

For further advice about what options could be available to you and your situation, please do not hesitate to contact us or read more in our debt help guides section.