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On 4 May 2021, new regulations will be implemented that are designed to help those struggling with debt to apply for breathing space with the assistance of a regulated debt advisor, to benefit from legal protections against creditor action.

The Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 will create two types of statutory moratoriums. The purpose will be to place specific duties on the creditors.

A Breathing Space moratorium will last up to 60 days or until the debt advisor or court cancels, if earlier. The Mental Health Crisis moratorium ends 30 days after the debtor’s mental health crisis treatment has ended and ongoing treatment must be confirmed every 20 to 30 days. Furthermore, there is no limit on the amount of times a debtor may have to engage the Mental Health Crisis moratorium, but a debtor can only engage the Breathing Space moratorium once every 12 months.

An individual will not be able to apply for a Breathing Space moratorium if they have a debt relief order, are in an Individual Voluntary Arrangement (IVA), or be an undischarged bankrupt, and not already have had a Breathing Space moratorium within the last 12 months from when they apply.

Whilst the new regulations provide some breathing space and prevents enforcement action or additional costs being added to the debt, all payments must continue to be made, especially priority bills, as this is not a payment holiday.

Guidance notes for creditors and debt advisors can be accessed here.

If you would like to discuss the new regulations further or require guidance on a bankruptcy-related matter, please contact Adina-Leigh Collins or Bimal Kotecha in our insolvency team.