The Debt Respite Scheme (Breathing Space Moratorium and Mental Health
Crisis Moratorium) (England and Wales) Regulations 2020
come into effect on 4 May 2021.
These new Regulations are designed to protect certain consumer or sole
trader debtors with problem debt. Where they apply, the Regulations create
a debt moratorium by placing a constraint on a creditor exercising their
legal right to take certain steps towards achieving debt recovery or to
take legal action to recover debts for a period of time (a “breathing
Even prior to the pandemic many creditors were providing a breathing space
to customers to support them.
In essence, the aim of the scheme established by the Regulations is for any
individual with problem debt to receive professional debt advice and to
have a breathing space with a view to finding a long-term solution to their
financial difficulties. Free access to advice will be available to relevant
debtors. (The scheme also makes special provision for a breathing space for
a debtor who is receiving mental health crisis treatment.)
The Insolvency Service will be responsible for notifying you as a creditor
when a breathing space has commenced which affects a debt owed to you.
You now need to start thinking about, and then in good time putting in
place, systems to ensure that neither you, as a creditor, nor your agents
take any prohibited action against individuals who have the benefit of a
breathing space under the Regulations.
Creditors should be comforted that the new scheme will bring greater
formality and early involvement of debt professionals.
It is very important that you familiarise yourself in detail with the
Regulations, to see not only how they operate but also their potential
impact on you as a creditor.
Guidance Notes: Debt Recovery and Legal Action
have recently been updated to include a brief outline of the purpose and
effect on creditors of these new Regulations. The
Guidance Note: Trade Credit and Credit Control
has also been updated to take account of the Regulations.
We recommend that you read both of these recently updated Guidance Notes,
in particular the information about the impact of the Regulations.
The second part of HM Government’s debtor protection scheme will be a
statutory debt repayment plan, a statutory agreement that will enable
someone in problem debt to repay their debts to a manageable timetable,
with legal protections from creditor action for the duration of their
agreement period. HM Government will in due course implement this part of
the debtor protection scheme, but it has not yet set an implementation date
The contents of this Newsletter are for reference purposes only and do not constitute
legal advice. Independent legal advice should be sought in relation to any specific