One in four people experience mental health problems of some kind each year in England, and as many as one in six people experiencing a common mental health problem in any given week. This is an growing problem that is often linked to financial difficulties – something which will increasingly be in the spotlight as we see the cost of living increase.
The Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 came into force in May 2021, with the purpose of providing further assistance to individuals in severe financial difficulty as a result of the pandemic.
The Scheme covers two bases, a standard breathing space moratorium which grants an individual 60 days’ legal protection from creditor action or a mental health crisis breathing space which has no set time limit and continues for as long as mental health crisis treatment is being received (and an additional 30 days).
Given the aftermath of the pandemic coupled with the costs of living crisis it is likely that we will see both the standard breathing space moratorium and mental health crisis breathing space used as they become more known about, so creditors will need to be aware of their responsibilities.
In short, only a debt advice provider can start a breathing space, and an individual can only obtain a mental health crisis moratorium if an Approved Mental Health Professional (AMHP) certifies that a person is receiving mental health crisis treatment.
Mental Health Crisis Breathing Space
The regulation helpfully defines a mental health crisis moratorium as a moratorium in respect of a debtor who is receiving mental health crisis treatment.
The Regulation 28 (2) provides that a debtor is receiving mental health crisis treatment when the debtor:
- a) has been detained in hospital for assessment under sections 2 or 4 of the Mental Health Act 1983,
- b) has been detained in hospital for treatment under section 3 of that Act,
- c) has been removed to a place of safety by a police constable under sections 135 or 136 of that Act,
- d) has been detained in hospital for assessment or treatment under sections 35, 36, 37, 38, 45A, 47 or 48 of that Act, or
- e) is receiving any other crisis, emergency or acute care or treatment in hospital or in the community from a specialist mental health service in relation to a mental disorder of a serious nature.
Regulation 28 (3) specifically defines “specialist mental health service” as a mental health service provided by a crisis home treatment team, a liaison mental health team, a community mental health team or any other specialist mental health crisis service.
It therefore appears Regulation 28 sets a higher threshold for those available to obtain a mental health moratorium than someone perhaps receiving treatment for mental health illness from their General Practitioner. It is also clear in the Government Guidance on the scheme that Doctors (including GP’s) can’t provide the evidence required to a debt advisor for the moratorium but they can refer someone to an AMPH for the purpose of a mental health assessment.
The mental health crisis moratorium offers more protection than the standard breathing space moratorium, and is likely to last as long as the treatment continues, plus 30 days. This is regardless of how long the crisis treatment lasts, whereas the standard breathing space moratorium only lasts a maximum of 60 days.
The application doesn’t need to be made by the debtor, and can be made on their behalf by their mental health nurse, social worker, carer and others. However, the same criteria as for the standard breathing moratorium still must be met.
By way of a reminder, if a moratorium is granted all legal action relating to any debt must stop, including court proceedings. The creditor is also unable to take any steps to require a debtor to pay interest, fees, charges or take any enforcement action, in respect of the moratorium debt for as long as the treatment lasts plus 30 days.
A breathing space for debtors?
As noted above, a standard breathing space moratorium is started through an authorised debt adviser. At the point of a creditor being notified that a breathing space has been started all action must be halted including existing court proceedings, enforcement action and sending letters in relation to repayment. Any interest or charges which accrue during a breathing space have to be waived (apart from interest on a principal debt on a secured debt). The debt adviser should only consider a breathing space as appropriate where it is the case that an individual cannot or will not be in a position to repay all or some of their debts.
What about the creditors?
If a creditor considers the moratorium unfairly prejudices their interest or there is an error in the granting of the moratorium then a creditor can require the debt advisor undertake a review of the moratorium and cancel it (regulation 17). This request must be made within 20 days beginning on the day the moratorium started. If a creditor is still unhappy with the debt advisor’s decision a creditor can apply to the Court to review whether the moratorium should be cancelled. The Court is not able to consider the mental health crisis team or the AMPH’s decision.
There is limited guidance on what would amount to unfair prejudice for the Court to cancel the mental health moratorium. In the recent case of Axnoller Events Limited v Brake & anr  EWHC 2308 (Ch) the Judge accepted that unfairness was to be assessed objectively and the Court must carry out a balancing exercise between the creditor and debtor on a case by case basis, although commenting these are ‘chalk and cheese’. The Judge commented that he wasn’t going to lay down any firm guidance for the future.
How will it work in practice?
It will be interesting to see how the schemes will works in practice, whether it will assist the individual using them, and their creditors response after the breathing space has come to an end. Creditors may see a standard breathing space as delaying the inevitable, due to the fact that it should only be used when debts cannot be repaid. Whereas the mental health crisis breathing space will no doubt be seen as a positive in providing a lifeline to people in a very vulnerable position, and perhaps at a point when they don’t have capacity to engage with their creditors or in court proceedings.
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