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Breathing Space not a payment holiday

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Tenants relying on a new scheme to put their finances in order have been be warned that they must continue to pay rent as it arises.

‘Hundreds of thousands of people struggling with debt problems will be supported’ by the new Breathing Space scheme, launched this week.

The debt respite scheme allows those facing financial difficulties to ask for legal protection from creditors for 60 days. During this time most interest and penalty charges will be frozen, and enforcement action halted. Participants will also receive professional debt advice to help them get their finances back on track.

But should those using Breathing Space fail to comply with their continuing obligations, including rent payments, their debt adviser will have discretion to cancel their protections.

‘We’re determined to tackle problem debt, but it is incredibly hard to get your finances back on track when your debts are piling up and you’ve got creditors at the door’, said Economic Secretary to the Treasury, John Glen.

‘This scheme will give people a breathing space from charges, distressing letters and bailiff visits, so they can tackle their problem debt with support from a professional debt advisor.

‘The scheme is also expected to benefit creditors, with over £400m in extra debt repayments expected in the first year of the scheme, as people are supported to get their payments back on track’.

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

There are two types of Breathing Space: standard breathing space and a mental health crisis breathing space.

A standard Breathing Space is available to anyone who cannot or is unlikely to be able to repay qualifying debts, including rent arrears. Applications must first apply to a debt adviser although he or she may decide a Breathing Space is not appropriate, for example if the debtor has assets that could easily be sold to clear the debt.

Guarantor loans can be included in a Breathing Space, but the protections do not extend to the guarantor. The guarantor can apply for their own breathing space, if they’re eligible.

Creditors, including landlords, notified that a debt is in a Breathing Space must stop all action related to that debt.

But rent is specifically identified as an ‘ongoing liability’ which the debtor needs to keep paying. ‘If they don’t, the debt adviser might cancel the standard breathing space’, said the Government.

‘A Breathing Space is not a payment holiday. While you cannot enforce a breathing space debt during a breathing space or charge interest or fees on it, a debtor is still legally required to pay their debts and liabilities. During the Breathing Space, the debtor should continue to pay any debts and liabilities they owe you. You can continue to accept these payments, including those you get from existing direct debits’.