Emma Bowditch


DATE PUBLISHED: 17 May 2021 LAST UPDATED: 26 Mar 2024

The new Debt Respite Scheme – What should I do if I am owed money by a debtor subject to the Scheme?

We recently published a news article that outlined the new Debt Respite Scheme (Breathing Space) (“the Scheme”) which is in force from 4 May 2021, following The Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 being introduced.

What should I do if I am a creditor owed money by a debtor subject to the Scheme??

As a creditor, you shall be notified electronically if a breathing space period has commenced against an eligible debtor that owes you money. If you do not have a form of electronic communication or receive notifications via post, it is likely that by the time you receive notification, the Scheme will have already commenced.

Once notified, you must make sure you immediately cease the following action:

  1. Requesting the debtor pay certain interest, fees, penalties or charges to you for the debt that is subject to the Scheme during the breathing space;
  2. Any enforcement or recovery action to recover the debt, either by you direct, or via any agent you have instructed to deal with the debt on your behalf; and
  3. Contacting the debtor to request repayment of the debt, unless you have obtained permission from the Court to do so.

What if I disagree with the breathing space?

If a creditor disagrees with the breathing space, then a creditor can challenge it by requesting that the debt advisor conduct a review, if the following circumstances apply:

  1. The breathing space unfairly prejudices the creditors interest;
  2. The debtor does not meet at least one of the eligibility criteria for a breathing space;
  3. Any of the debts included in the breathing space do not qualify under the Scheme; or
  4. The debtor has enough funds to repay their debts.

There is limited time to request a review and the request must be made either:

  1. Within 20 days of the breathing space starting; or
  2. Within 20 days of an additional debt being added to the breathing space.

It is therefore important to act promptly should you wish to challenge a debtor’s application to be eligible for the Scheme.

What happens if I have already started legal proceedings?

If you receive notification that your debtor has already applied for breathing space under the Scheme after you have already commenced legal proceedings for recovery of the debt(s) owed to you, then, upon receipt of the notification, you must contact the Court or Tribunal in writing to notify them that a breathing space is in place.

In cases where a bankruptcy petition has started, the Court will stop the bankruptcy proceedings until the breathing space ends, or is cancelled. Other Court proceedings about the debt can continue until the Court or tribunal makes an Order or Judgment (however, this does not apply to enforcement of Court Judgments or Orders). But, Court Orders and Judgments relating to a debt subject to the Scheme cannot be enforced until the breathing space ends.

Fortunately, you are still entitled to start or continue any legal action relating to any debt that does not qualify as a breathing space debt (i.e. an excluded debt), during the breathing space. Details of what is an excluded debt under the Scheme is outlined in our earlier article and within the Government guidance.

How can Ellis Jones help you?

If you are a creditor that has a debt owed to you and you want to make sure you pursue the debt in the correct way, we would be happy to discuss your case and see if we are able to assist. Should you wish to discuss this further, please do not hesitate to contact our specialist Dispute Resolution team on 01202 525333.

How can we help?

When you submit this form an email will be sent to the relevant department who will contact you within 48 hours. If you require urgent advice please call 01202 525333.

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