The Debt Respite Scheme provides individuals in debt with a 60-day period in which they are able to seek professional debt advice.
The new scheme is available to any individual in England and Wales with a debt problem and provides them with breathing space to restructure their debt and find a long-term solution.
The Debt Respite Scheme provides individuals with a 60-day moratorium from duress from creditors, rising if the individual has an Approved Mental Health Professional (AMHP) certificate, in which case the moratorium lasts as long as the individuals mental health crisis treatment continues, plus 30 days.
To access the scheme, individuals must contact a debt advice provider who will assess their eligibility and, if deemed eligible, an application must be made via a debt adviser.
To be eligible, an individual must:
- Live, or usually reside, in England or Wales
- Owe a qualifying debt to a creditor
- Not have a debt relief order (DRO), an individual voluntary arrangement (IVA), an interim order, or be an undischarged bankrupt at the time of application
- Not have already had a breathing space granted in the last 12 months
- Be deemed unable or unlikely to pay the debt as it falls due
If a Debt Respite Scheme is deemed the most appropriate solution, the debt advisor will apply for the moratorium to be instated. Once in place, the moratorium provides protection from creditors and creditor agents, during which time they cannot take any enforcement action, and most charges, including interest, are frozen.
There are several conditions which must be abided by during a moratorium:
- The breathing space period is not a payment holiday, and as such the individual must continue to pay their ongoing liabilities, like priority bills
- Individuals must not take out any additional credit that exceeds £500
- The individual must continue to engage with the debt advice provider and update accordingly if circumstances change
Breathing space isn’t a temporary fix – it’s crucial that you work with your debt adviser and engage fully during this crucial period to cultivate a long-term plan and take steps to regain control of your finances.
Dean Nelson, Brett Barton, Nicholas Lee, Andrew Stevens and Emily Oliver are all licensed in the United Kingdom to act as Insolvency Practitioners by the Institute of Chartered Accountants in England and Wales. They are bound by the Insolvency Code of Ethics which can be found here.
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