The basis of the scheme is that consumers make a single payment assessed by an approved debt adviser which is then distributed to creditors included in the plan. These can include arrears of rent or mortgage payments should the debtor choose to do so.
FAQs: Debt Respite Scheme, Breathing Space
The scheme provides a temporary period of respite from creditor (e.g. landlord/letting agent) action to help people in problem debt (e.g. tenant) consider their options and engage with professional debt advice. The Scheme came into force on 4 May 2021, but qualifying debts can include any that the debtor had before the legislation started.
SDRP will be a new statutory debt solution focused on repayment of debt, rather than debt relief, addressing a gap in the debt solution landscape. The SDRP will include a broad range of debts, including debts owed to the UK Government and to creditors outside of financial services. It will also protect debtors from enforcement action, creditor contact, interest, fees, and charges on their debts while they repay them.
The consultation closes on 5 August 2022 and the UK Government intends to implement SDRPs in 2024.
Housing costs to be given priority
When putting together an SDRP, housing debts are classed as 'discretionary non-eligible debt'. This means that while they can be included in the plan, the consumer may choose not to do so because the likely longer period over which rent arrears will be paid in the plan could lead to a landlord not renewing an individual’s tenancy. Similarly, if an individual had a mortgage and their mortgage arrears were not paid when they left the plan, this could put them at risk of repossession.
Ongoing rent and mortgage payments must continue to be met and will be considered in calculating the available income for a repayment plan, and where arrears of housing costs are included in a plan, these will be classed as priority debts. This means that 30 per cent of the repayments available each month will be split between priority debts on a pro-rata basis, and the remaining 70 per cent between all debts under the plan, including priority debts.
Right to object
Where arrears of housing costs are included in a plan, the creditor must be given notice of the proposals and will have 14 days to object on specified grounds, including that it is based on inaccurate information or that it prejudices the interests of the creditor.
Plans will be reviewed every 12 months or at other times if there is a significant change in circumstances, when a payment break may also be available.
