Little-known ‘lifeline’ scheme to pause credit card and loan debts if you’re struggling with mental health

HOUSEHOLDS struggling with their mental health can have credit card and loan debts paused through a little-known scheme.

The Debt Respite Scheme, also known as Breathing Space, gives you legal protections from creditors for a set period of time.

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Thousands can get help pausing creditor debt through the Debt Respite Scheme[/caption]

There’s tailored support available if you’re suffering from a mental health crisis too.

The latest Government statistics reveal roughly 200,000 people have signed up for Breathing Space since it launched.

The number of those registering is increasing, with 41,125 signing up in 2021, 70,772 in 2022 and 88,391 in 2023.

But ministers anticipated around 700,000 people would benefit from the scheme when it was first set up.

That means hundreds of thousands haven’t registered for the scheme when they could have.

Simon Trevethick, from debt charity StepChange, said: “For those who meet the qualifying requirements, Breathing Space can provide a lifeline, allowing them the space to assess how best to move forward and out of debt and towards a financially secure future.”

It comes as Mental Health Awareness Week kicks off, which aims to increase public understanding of mental health and how mental health issues can be prevented.

Here’s everything you need to know about the scheme.

What is Breathing Space?

Breathing Space is a Government scheme that launched three years ago that gives you temporary protection for any creditors.

The protection includes a pause on enforcement action, like bailiffs, contact from creditors and freezing interest and charges on debts.

A creditor is anyone you owe money to, including banks, credit card companies and mortgage lenders.

There are two types of Breathing Space – standard Breathing Space and mental health crisis Breathing Space.

Most people opt for the standard Breathing Space option.

This allows you time to get debt advice and set up a debt solution without having to worry about being chased by creditors.

This might come in the form of a repayment plan for your debt, or an administration order, debt consolidation plan or insolvency.

If you pass eligibility checks, your creditors won’t be able to add interest or fees to your debts, or take enforcement action, including sending bailiffs to your home, for up to 60 days.

However, if you can afford to be making regular debt repayments, the Breathing Space won’t stop this from happening.

The mental health crisis Breathing Space is much less common and for those receiving mental health crisis treatment.

The protections that come with this type of Breathing Space are much stronger compared to standard Breathing Space.

It lasts as long as the person’s mental health crisis treatment, plus an additional 30 days.

The advantage to this is that it doesn’t matter how long your mental health crisis treatment lasts, you will be legally protected.

While the Breathing Space scheme is useful, it’s important to remember it simply places a moratorium on your debt, and it will eventually have to be repaid.

Jamie Thunder, senior policy adviser at poverty charity Z2K, said: “It’s just a temporary break, not a solution.

“You’ll need to speak to a debt adviser to set it up, so make sure you work with them to put a long-term plan in place.

“Because at the end of the Breathing Space, you still owe the money and your creditors can start to contact you again.”

Who is eligible and how do I apply?

You can apply for either Breathing Space scheme if you live in England or Wales and must owe at least one qualifying debt to a creditor. This includes:

• credit cards
• store cards
• personal loans
• pay day loans
• overdrafts
• utility bill arrears
• mortgage or rent arrears

But there are certain debts you can’t use the scheme for. This includes:

• secured debts such as mortgages or conditional sale agreements
• debts incurred from fraud or fraudulent breach of trust
• liabilities to pay fines imposed by a court for an offence
• obligations from a confiscation order
• child maintenance or obligations under an order made in family court proceedings
• a crisis or budgeting loan from the social fund
• student loans
• damages they need to pay for death or personal injury caused to someone else
• advance payments of Universal Credit
• council tax liabilities that have not yet fallen due

You can’t apply if you have already used the same scheme in the last 12 months – but you may be able to use the mental health crisis scheme if you’ve already used the standard one.

You also won’t be eligible if you already have a debt relief order or individual voluntary arrangement (IVA).

We reveal more about these two options below.

There’s no limit to how many times you can enter a mental health crisis Breathing Space.

If you are applying for the mental health crisis Breathing Space, you will need to do alongside an Approved Mental Health Professional (AMHP).

They will help you provide evidence you are receiving mental health crisis treatment.

You can apply for either Breathing Space option through a debt adviser.

The moneyhelper.org.uk website, run by the Government, has its own debt adviser finder tool, which is free to use.

You can use it to find an adviser to chat to online, over the phone or face-to-face about your next steps.

Depending on which option you choose, you will either have to enter your postcode telling you the nearest centre to go to.

Or, you will be redirected to a charity or debt adviser’s website or contact number.

Or, you can call these three charities who will be able to help you further:

• Turn2us – 0808 802 2000
• Policy in Practice – 0330 088 9242
• EntitledTo – 0800 328 5644

As Jamie said, not only will the debt adviser be able to sign you up for Breathing Space, they should be able to help you get a long-term plan in place to manage your debt.

How else can I manage my debt?

There’s a few options available to you if you don’t want to sign up to the Debt Respite Scheme:

Debt Relief Order

Debt Relief Orders (DRO) are for people who owe less than £30,000 and do not own a home.

A DRO freezes your debt repayments and any interest for 12 months. Any debt still owed at the end of the 12-month period is wiped.

If you sign up for a DRO, you still have to pay any rent or bills, and certain debts are not included in the order, such as student loans or court fines.

Certain restrictions are also placed on you over the 12-month period.

This includes that you can’t borrow more than £500 without telling the lender about your DRO and you can’t open a bank account without telling the bank or building society about the DRO.

You can apply for a DRO through an approved debt adviser.

IVA

An Individual Voluntary Arrangement (IVA) is a legally binding agreement that usually lasts for around five to six years.

By signing up for an IVA, you agree to make regular payments to an insolvency practitioner, who divides the money between your creditors.

The insolvency practitioner will also work out what you can afford to repay and how long the IVA will last.

You have to pay a fee to set up an IVA, and usually a fee each time to make a payment towards it.

Any debts remaining at the end of an IVA are written off and you can start fresh.

Debt management plan

A debt management plan is an agreement between you and your creditors to pay back all your debts.

They are suited to people who can only afford to pay back their creditors a small amount each month.

You set up a debt management plan with a licensed debt management company, who you pay the money to.

This company then shares any money you send it between your creditors.

You can find a debt management company on the Financial Services Register online.

Do you have a money problem that needs sorting? Get in touch by emailing money-sm@news.co.uk.

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