Insolvency Made Clear: A Guide for Debtors

Alternatives To Bankruptcy
The decision is usually made without a hearing. There is space for the debtor
to suggest an appropriate repayment amount per week or month, or the court
can make its own decision. There is space on the form to state any particular
circumstances which the court ought to know about.
If the order is made, the court will send a copy to all the creditors who will be included
in a schedule to the order. This procedure is appropriate when the debtor
cannot use a DRO because they do not meet the qualifying conditions. They
can be used when the debtor has a monthly income above the DRO threshold
but the creditors refuse to agree to an IVA. These orders can be made by any
County Court.
There are possible changes to this procedure, but since these are on indefinite
hold, they are of no current interest to a debtor.
Stop Press: The Debt Respite Scheme (Breathing Space)
The Government is planning on introducing a ‘Debt Respite Scheme’, also
known as ‘Breathing Space’. This will allow debtors some protection from enforcement
action, including the presentation of a bankruptcy petition, for up
to 60 days. For example, creditors will not be able to start a claim against the
debtor, send bailiffs, repossess property, or disconnect the gas supply, while the
scheme is in place. The Debt Respite Scheme will also freeze most interest and
charges on debts. The Debt Respite Scheme is available to every debtor, but there
is an extension for individuals who are receiving mental health crisis treatment.
Those individuals will be able to access this scheme for as long as their crisis
treatment lasts, plus 30 days. The scheme can only be accessed via a debt adviser,
and the policy behind the proposal is to encourage debtors to get debt advice
at an early stage. The debt adviser will need to be satisfied that the Debt Respite
Scheme would be appropriate for their client, and that the debtor cannot, or is
unlikely to be able to, repay all their debts.
This scheme is scheduled to commence in May 2021. It appears to be a shortcut
to obtaining an interim order and could be used to allow the debtor to enter
into an IVA or some other compromise position with their creditors. However,
the Debt Respite Scheme as currently drafted appears to only stop bankruptcy
proceedings beginning, and does not automatically stay bankruptcy proceedings
once they have been initiated – regardless of whether the debtor is having
a mental health crisis. However, a judge would still have discretion to adjourn
a hearing if they considered it appropriate during the ‘Breathing Space’ period.
For more details, see the Government’s advice to creditors at https://www.gov.
uk/government/publications/debt-respite-scheme-breathing-space-guidance/
debt-respite-scheme-breathing-space-guidance-for-creditors.
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