Debt relief: New respite scheme giving “breathing space” for families confirmed for 2021

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Debt relief will soon be provided for individuals courtesy of a Debt Respite Scheme. This scheme has been in the works for a number of months now but on November 17, legislation was pushed through which confirmed the new support will become available from May 4 2021.

The support is designed to help people by providing debt advice which will be aimed at providing them with certain legal protection from creditors for around a 60-day window, which has been dubbed “breathing space”.

Under the rules, creditors will also be required to suspend an action to recover the arrears for the 60-day period.

The regulations also provide the same protection to individuals who are receiving mental health crisis treatment.

Philip Robers, a debt recovery expert and partner at national law firm Clarke Willmott LLP, welcomed the new regulations: “These are very important changes and are another positive step towards encouraging individuals who are experiencing difficulty with debt to seek help from the debt advice sector.

“Save for some limited exceptions, the scheme will apply to debts owed by individuals unless they have been incurred in connection with a VAT registered business or a partnership.”

Philip went on to explain the moratorium on taking action, and fees, penalties and interest, can come at any stage of recovery action.

Where proceedings have been started (unless there has been an admission from the debtor before or during the moratorium) default judgment cannot be requested.

Bankruptcy proceedings will be stayed and, save for a charging order or attachment of earnings order made prior to the moratorium, enforcement actions will also be stayed.

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Philip went on to explain how the rules will work out in practice: “The onus is on the creditor to advise the court or tribunal of the moratorium and the court or tribunal must take the appropriate measures to ensure the claim does not progress thereafter.

“There is much to think about for creditors affected by the regulations.

There will be a lot to prepare so that measures are implemented to ensure compliance.

“The impact on creditors will depend on the nature of their business and their ability to absorb delays in receiving payment.

“It is worth noting that, in appropriate circumstances, which include a creditor being unfairly prejudiced by the moratorium, the creditor can request a review from the debt advisor or, if necessary, from the court.

“The initial request for a review must be made within 20 days and should be supported by evidence.

“We are looking forward to working with creditors over the coming months to put in place procedures to effectively comply with the regulations and to maximise prospects of making fair and ethical recoveries.”

These changes could not come sooner for some people as recent research from the Joseph Rowntree Foundation revealed around 2.5 million households are worried about covering their rent over the winter months, with 700,000 already being in arrears and 350,000 at risk of eviction.

Additionally, the Institute for Public Policy Research recently warned household debt problems could get even worse in the coming months as a result of the pandemic.

In a new report on debt issues, it was found many people have been pushed from “just about managing” to a point where they are now “just not managing”.

As the organisation looked into data from a regular survey of UK households and a special survey carried out soon after the first peak of the pandemic, IPPRs analysis showed the following groups of people were particularly struggling with debt:

  • Young people (aged between 16 and 29)
  • Ethnic minorities
  • Renters
  • People on low incomes
  • Those with long-term health conditions

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