New protections have come into place to help people with debt problems. The government's Debt Respite Scheme gives people time to identify the most appropriate debt solution for their circumstances.

1. What is the Debt Respite Scheme?

The Debt Respite Scheme is designed to give people with debt problems the opportunity to take control of their finances. It gives people legal protections from all creditors (not just lenders, but also other debts, such as council tax and utility bills) whilst they receive debt advice, giving them time to review their finances and identify the most appropriate debt solution.

The Scheme is more commonly referred to by the two types of protections (known as moratorium) that can be provided:

• Breathing Space moratorium - which can last for up to 60 days
• Mental Health Crisis moratorium - for people receiving mental health crisis treatment - which last as long as the treatment is continuing, and then an extra 30 days.

Where the same protections apply to both a Breathing Space moratorium and a Mental Health Crisis moratorium, they are referred to as ?moratorium? in these FAQs.

2. What is the effect of a moratorium?

Once in a moratorium, you have certain rights in relation to some debts, depending what they are for (see question 6 for more information). For these debts, the people you owe money to must:

• Stop any action they are taking to get repayment of the debt through collections or court action during the moratorium. This includes informing any debt collection agencies or agents that they have appointed to recover the debt from you.
• Stop contacting you to demand repayment of what you owe during the moratorium (unless they have permission from a court or required to do so by law).
• Never ask you to pay certain interest, fees, penalties, or charges on the debt that arise during the moratorium period.

3. Will I be eligible for a Breathing Space moratorium?

If you are concerned about your finances, you should seek help from a debt adviser as soon as possible. 

The Money Advice Service provides information on free and impartial debt advice. This includes organisations that can provide online support, as well as telephone and face-to-face advice services.  https://www.moneyadviceservice.org.uk/en/tools/debt-advice-locator 

The debt adviser will help check if you are eligible for a Breathing Space moratorium, if you

• Have debts or bills you are unable to pay
• Live in England or Wales
• Have not been in a Breathing Space moratorium in the last 12 months
• Are not an undischarged bankrupt, or subject to a Debt Relief Order, or an Individual Voluntary Arrangement.

For a Mental Health Crisis moratorium, an approved mental health professional must confirm that you are receiving mental health crisis care.  A number of people could submit that evidence to a debt advice provider on your  behalf, such as a carer, a mental health nurse or a social worker.  A nominated point of contact (approved mental health professional, care co-ordinator or mental health nurse) will need to confirm to the debt adviser each month that you are continuing to receive crisis care. 

If you live in Scotland or Northern Ireland and are concerned about your finances, you can use the Money Advice Service link [https://www.moneyadviceservice.org.uk/en/tools/debt-advice-locator] to find a debt adviser to help you.

4. How do I apply for a moratorium?

You can only apply for a moratorium through a debt adviser. The debt adviser will decide if you are eligible, and whether the moratorium will be in your best interests.

To help you in deciding which debt adviser to contact, the Money Advice Service gives information on providers of free and impartial debt advice. This includes organisations that can provide online support, as well as telephone and face-to-face advice services. https://www.moneyadviceservice.org.uk/en/tools/debt-advice-locator.

Rethink Mental Health (https://www.rethink.org/) is an organisation that supports people affected by mental health issues.  They will have a dedicated team to help anyone in crisis care to enter a mental crisis moratorium, whether dealing with your Approved Mental Health Professional, your carer or you directly.  They are also able to provide debt advice as and when that is appropriate.

5. How often can I apply for a moratorium?

The goal of entering into a moratorium is that a long term solution to your debts can be identified. If your circumstances change, you can apply for a moratorium once in any 12 month period.

There are no restrictions on the frequency that you can apply for a Mental Health Crisis moratorium. If you need a Breathing Space moratorium following a Mental Health Crisis moratorium, there is nothing to prevent you from doing so and you should speak to a debt adviser.

6. Are all my debts protected by the moratorium?

Only ?qualifying debts? are protected. These are those debts that are outstanding at the date you apply for a moratorium:

• Secured borrowing (such as residential mortgage, motor finance or hire purchase) - only the arrears are protected and not the full amount borrowed.
• Unsecured borrowing and debts (such as credit cards and personal loans) - the total debt is protected.

Any new debts that might arise after you have applied for a moratorium, such as new mortgage arrears, or new spending on an overdraft or credit card, are not covered by the protections.

Some debts are not eligible for protection, such as fines imposed by a court, confiscation orders, student loans, or child support maintenance. Your debt adviser will be able to explain to you the debts that are not protected.

7. How long does a moratorium last?

A Breathing Space moratorium can last for up to 60 days, during which you are able to work with the debt adviser to review your finances and identify the debt solution most appropriate for you. The debt adviser will carry out a further review after about 30 days to confirm that the debt advice is progressing and you can still remain in the moratorium.

A Breathing Space moratorium could be cancelled earlier than 60 days by the debt adviser if:

• A formal debt solution is put in place sooner.
• You do not respond to the debt adviser's requests and questions to review your finances.
• You do not meet your obligations for the moratorium.  This includes a need to continue to pay certain ongoing liabilities, such as your mortgage payments or rent and utility bills. Your debt adviser will tell you what these are. If you do not make these payments, the debt adviser will consider if the moratorium should be cancelled or whether it would be ?unfair and unreasonable? to do so, and that you should remain in Breathing Space and continue to work with them towards a formal debt solution.

A Mental Health Crisis moratorium will continue whilst the mental health professional continues to advise that you are still receiving crisis care. After the end of the crisis care, the debt adviser has an extra 30 days to discuss your finances before the moratorium ends.

8. Should I stop making payments to my lender on any ?qualifying debts? during a moratorium?

Your debt adviser should discuss with you how you manage your income whilst they look to put a formal debt solution in place.  

If you can afford to make payments to your creditors, you should continue to do so as this will reduce your overall level of borrowing. A moratorium is not the same as a payment holiday or deferral and non- payments will be recorded as arrears on your credit file. Payments you make to your lender will continue to be accepted.

In some circumstances payment being made by standing order or Direct Debit may be suspended or changed automatically by your lender during a moratorium. Your lender may contact you to explain the implications if they are going to do this.

Whilst in a moratorium, you are obliged to keep up payments to certain ?ongoing liabilities?, such as your normal mortgage payment (not including any arrears). If you do not make these payments, the debt adviser will consider if the moratorium should be cancelled, or whether it would be unfair and unreasonable to cancel and you should continue to work with them towards a debt solution. Your debt adviser will explain what the ?ongoing liabilities? are and what might happen if you do not pay these during the moratorium.

9. What help can I get if I am not eligible for a Breathing Space?

If you are concerned about your finances, you should not delay seeking help from your lender or a debt adviser. If you are not eligible for a moratorium, the debt adviser will explain how they can help you.

If, for example, you could pay your debts with some help with budgeting, a Breathing Space moratorium might not be the right option for you.  Whilst you are discussing your finances with a debt adviser, lenders could still grant you a period of ?forbearance? to complete the review. During an agreed period of forbearance, lenders will not contact you for payments and will inform you if interest and fees will not be charged.

Your debt adviser can explain what other creditors (such as local authorities for council tax payments or utility companies) might do whilst you are seeking debt advice.

10. Why am I getting letters from my lender during the moratorium?

During the moratorium your lender should not contact you for payment of the qualifying debts that are in the moratorium.

Your lender might however contact you to:

• Inform you about the implications of the Breathing Space moratorium.
• Set up the debt solution that is being proposed through the debt adviser.
• If they are required to do so by certain laws or regulation. Under the Consumer Credit Act, a lender is required to send you regular statements or a ?notice of sums in arrears? (NOSIA) telling you that you have arrears on the account on a periodic basis. Your debt adviser will probably have warned you about this and how to treat any such notices.

There are rules which set out when the moratorium begins. Weekends and bank holidays may impact the date a lender becomes aware that a moratorium is in place and the lender may have sent letters and other communications after the start of a moratorium but before becoming aware of it.  If you are not sure about the impact of any communications you receive from your lender you should speak to the lender or the debt adviser, who will be able to confirm the position.

11.  Why are interest and fees appearing on my statement?  

When you enter a moratorium, you are never required to pay interest, fees and charges on the amount of borrowing that is classed as ?qualifying debt? that arise during the moratorium period.

• Interest and fees accrued before the start of the moratorium are still payable, even if these are applied during the moratorium period.
• Some firms might not be able to stop interest and fees that arise during the moratorium from being shown on your statement. If this does happen, you will not be required to pay these interest and fees. Your lender will let you know what to expect and when your account will be adjusted. They will reassure you that the interest and fees arising during the moratorium are not payable.
• For secured lending, the requirement not to pay interest and fees only relates to the arrears, and not the full outstanding balance. For example, if you have a mortgage, interest on any arrears will not be payable, but interest on the remaining balance is payable.

12. I have a joint debt, will the other person be advised of the moratorium?

Lenders will not routinely write to you or the joint borrower just because you are entering into a moratorium. 

Where appropriate you should consider informing the joint borrower if they are not aware of the moratorium and there are potential impacts for them, e.g. if you will be unable to make payments and this leads to arrears, this will be reported on the credit file against both you and the joint borrower. Your debt adviser will explain the potential implication of the Breathing Space moratorium on the joint borrower.

Lenders will not try to collect from you or the joint borrower any arrears on the protected debts whilst you remain in a moratorium.

Some lenders may make the joint borrower aware you have entered into a moratorium and provide information to explain the potential impact this could have on them.

13. Will taking a moratorium be reported on my credit report?

No, the fact that you take a moratorium will not be reported on your credit file.

The reporting on your credit file will continue as normal, and this will include for example whether you are making the contractual payments and the outstanding balances.

A moratorium is not a payment holiday and so missed payments will be reported on your credit file as arrears.

14. Can I still use my credit card or overdraft?

Being granted a moratorium will not always impact your ability to use your credit card or overdraft. However, lenders are able to suspend card or overdraft use in accordance with their usual business practices. 

They will advise you if they need to do this and what to do if you feel you need to continue to use the credit card or overdraft for essential living expenses. 

15. Where can I get more general debt advice?

If you feel that you need debt advice because for example, you have a number of unmanageable debts across a number of lenders, you should not delay getting help - the sooner you have a clear picture of your options, the quicker you can start to manage things.

The Money Advice Service provides information on free and impartial debt advice. This includes organisations that can provide online support, as telephone and face-to-face advice services are very busy at the present time.  https://www.moneyadviceservice.org.uk/en/tools/debt-advice-locator.

16. Can my business debts be included in the moratorium?

Some business debts can be included in a moratorium, for example if you are a sole trader and not registered for VAT. You should discuss your business debts with the debt adviser, who will assess whether they are eligible.