Debt respite

The Debt Respite (Breathing Space) Scheme comes into force on 4 May 2021 (the Scheme).

The Scheme has two forms of breathing space:

1. the standard breathing space (SBS)
2. the mental health crisis breathing space (MHBS).

Both the SBS and the MHBS are intended to prevent any further steps to be taken by a creditor against a debtor during the period they are in force.

It is beyond the scope of this article to provide full guidance on the Scheme and we recommend that the guidance from the Insolvency Service is also considered by anyone affected by one of the two forms of breathing space.

In this article we are concerned with the effect the making of an SBS or MHBS has on rent possession proceedings and so we give further information about the Scheme; its effect on rent possession proceedings; and what can happen in rent possession proceedings when an SBS or MHBS ends below.

SBS and MHBS

Both provide a breathing space for a debtor.

An SBS protects a debtor for up to 60 days.

An MHBS protects a debtor for as long as their mental health crisis lasts, plus a further 30 days.

Rent arrears is a debt that can be included within both in an SBS and an MHBS.

Applications for an SBS

A debtor can obtain a SBS by application to a debt advisor, who must approve the application and serve it on all creditors.

Debt advisers are either advisers authorised by the Financial Conduct Authority to offer debt counselling or a local authority (where they provide debt advice to residents).

Applications for an MHBS

A debtor can also obtain a MHBS by application to a debt advisor, but the debt advisor must have confirmation from an Approved Mental Health Professional (AMHP) that the debtor is receiving mental health crisis treatment.

As well as the debtor, the following persons can apply for a MHBS on behalf of a debtor:

• any debtor receiving mental health crisis treatment
• the debtor’s carer
• an AMHP
• care co-ordinators appointed for the debtor
• mental health nurses
• social workers
• independent mental health advocates or mental capacity advocates appointed for the debtor
• a debtor’s representative.

Eligibility for an SBS

To be eligible an debtor must:

• be an individual
• owe a qualifying debt to a creditor
• live or usually reside in England or Wales
• not have a debt relief order, an individual voluntary arrangement, an interim order, or be an undischarged bankrupt at the time they apply
• not already have a breathing space or have had a standard breathing space in the last 12 months at the time they apply.

The debt adviser must also be satisfied that the debtor meets both of the following conditions:

• the debtor cannot, or is unlikely to be able to, repay all or some of their debt
• an SBS is appropriate for the debtor.

Eligibility for an MHBS

The same criteria and conditions for an SBS apply, but the debtor must also be receiving mental health crisis treatment at the time that an application is made.

A debtor who has had an SBS or MHBS in the last 12 months may be eligible for an MHBS.

There is no limit to how many times a debtor can enter an MHBS.

Notification of an SBS or MHBS and what to do if you receive notification

A creditor is notified of an SBS or MHBS when it is put on to the breathing space register, which is maintained by the Insolvency Service.

If you receive notification you must stop:

• the debtor having to pay certain interest, fees, penalties or charges for that debt during the breathing space
• any enforcement or recovery action to recover that debt by you or any agent you’ve appointed
• contacting the debtor to request repayment of that debt, unless you’ve got permission from the court.

Rent arrears cases

Throughout the course of the SBS or the MHBS a creditor must not:

• serve a notice seeking possession
• commence a possession claim
• enforce a possession order issued before or during a breathing space
• obtain a warrant for possession.

If you have already started a possession claim before an SBS and MHBS has been made you must inform the court when you are aware it has been made.

The rent arrears aren’t written off because of an SBS or MHBS and should be paid off at a later stage, after neither form of breathing space is in place.

A debtor can make payments of rent during a breathing space.

Ongoing payments of rent should be made by the debtor during a breathing space because they aren’t included within the SBS and MHBS.

The court can give you permission to continue with a possession claim during a breathing space period.

Cancelling an SBS or MHBS

A debt advisor can cancel an SBS or MHBS and it is expected this may happen if ongoing debts, such as rent, aren’t being paid by the debtor.

A debt adviser must carry out a review of an SB between 25-35 days after it began.

A creditor can apply to a debt advisor to have the SBS or MHBS reviewed, but a review must be lodged within 20 days of it starting.

In addition, a creditor can apply to a court for an SBS or MHBS to be cancelled, but an application must be made within 50 days of it starting.

End of an SBS or MHBS

An SBS ends 60 days after it began, or the day after a debt advisor or court cancels it

An MHBS ends 30 days after a debtor’s mental health crisis treatment ended.

When an SBS or MHBS ends you can re-commence or start possession steps in a rent arrears case.