Token Payment Plan or Breathing Space: What's the Difference?

Breathing Space and a token payment plan are not the same thing, and they are not alternatives in the way a comparison table suggests. Breathing Space is a free government scheme that stops you being chased for debts, giving you a 60-day pause on interest, fees and enforcement action while you get advice¹. A token payment plan is an arrangement you keep paying into: small regular payments, sometimes as little as £1 a month, to creditors you cannot pay in full³.

The two often run in sequence rather than side by side. Breathing Space buys the time; a token payment plan is one of the things you might set up once that time is up. Both are free through StepChange, which does not charge for its advice or its service⁴.

Breathing space and a token payment plan: what each one does

Breathing Space, sometimes called the Debt Respite Scheme, is a statutory scheme that freezes payment demands and legal action by creditors so you can get free, quality debt advice⁶. It pauses most enforcement action and freezes most interest and charges¹. It is a free government scheme, and you do not have to pay for it².

A token payment plan works differently. It is for people who, at the time they were advised, would have struggled to pay more than a reduced amount to their debts, a situation described as a deficit budget⁸. Rather than pausing everything, you make small regular payments, such as £1 per month, to your creditors³. It is meant to give you breathing space from your creditors, but it is not intended to be a long-term debt solution⁹.

The distinction matters because one is a legal protection with a fixed end date and the other is a voluntary arrangement with no fixed term. Breathing Space cannot write off debt, cover all debts, stop money being taken from wages or benefits, last longer than 60 days, cover new debts taken out after it started, or let you stop paying other bills². A token payment plan does not carry those legal protections at all; it depends on creditors accepting and continuing to accept the arrangement.

Breathing space: a pause through a debt adviser in England and Wales

Breathing Space operates in England and Wales¹⁰. People there seeking debt advice may be entitled to a 60-day pause on interest, fees and enforcement action¹⁰. The scheme gives eligible people in problem debt who receive professional debt advice access to a 60-day period in which interest, fees and charges are frozen and enforcement action is paused¹¹.

To get standard Breathing Space you apply through an approved debt adviser, who must agree you need time to get debt advice and are likely to enter a debt solution⁵. You need to live in England or Wales, be unable to repay some or all of your debts as they fall due, not be in a debt relief order, an individual voluntary arrangement or be an undischarged bankrupt, and not have had Breathing Space in the last 12 months⁵. The legislation sets the same core test: the debtor must be unable, or unlikely to be able to, repay some or all of their debt as it falls due, and a breathing space moratorium must be appropriate¹².

During the pause, creditors cannot evict you for rent or mortgage arrears, start or continue court action to get their money, or charge interest or fees on missed payments⁷. Landlords cannot serve notice on you or evict you for rent arrears, and mortgage lenders cannot take legal steps to make you pay the arrears or repossess your home⁶. In most cases your energy supplier cannot disconnect your gas or electricity, and cannot fit a prepayment meter to take payments towards the debt⁵.

There is also a mental health crisis version. Someone in crisis treatment can enter Breathing Space without seeking advice from a debt adviser¹³. The debt adviser will end the breathing space if they cannot get confirmation that you are still getting crisis treatment¹⁴.

A token payment plan keeps paying something while your budget is negative

A token payment plan is for a specific situation: you would have struggled to pay more than a reduced amount to your debts at the time you were advised, which is what StepChange calls a deficit budget⁸. Instead of stopping payments, you make small regular payments, such as £1 per month, to your creditors, typically where your circumstances mean you cannot afford more³.

The purpose is to give you breathing space from your creditors while keeping something moving to them, but it is not intended to be a long-term debt solution⁹. That framing matters: a token payment plan is a holding position, not a destination. It keeps creditors from escalating in the short term and shows willing, but it does not reduce what you owe in any formal way, and it does not carry the legal protections that Breathing Space does.

Because it is voluntary, it depends on creditors agreeing to it and continuing to accept it. If your circumstances change, the plan is reviewed. StepChange publishes guidance on how to review a token payment plan, which is the point at which a different solution may become appropriate⁹.

Token payment plan or breathing space: how each one fits your situation

The two options answer different questions. Breathing Space answers "I need the pressure to stop while I work out what to do." A token payment plan answers "I cannot pay much, but I want to keep paying something."

Breathing Space is not available to everyone. You cannot have one if you currently have a debt relief order, an individual voluntary arrangement or a bankruptcy order⁷. A limited company cannot apply for breathing space¹⁶. The legislation also excludes debtors subject to a debt relief order, an interim order or individual voluntary arrangement, an undischarged bankrupt, another breathing space moratorium, or a mental health crisis moratorium¹².

A token payment plan has no equivalent statutory eligibility test, because it is not statutory. It depends on your budget showing a deficit and on creditors accepting the arrangement.

What each option costs: free through StepChange

Breathing Space is free. It is a free government scheme, and you do not have to pay for it². StepChange does not charge fees for its advice or its service⁴. StepChange and PayPlan provide debt management plans for free, while other debt management companies may charge a fee¹⁷.

That last point is worth separating out. The schemes themselves are free, but the wider market for debt help is not uniformly free. Where a fee-charging company is involved, the cost comes out of what you pay, which reduces what reaches creditors. Free and impartial debt advice is available, and StepChange has provided it for 30 years¹⁸.

StepChange also offers a free online benefits calculator, which is relevant because increasing income can change whether a token payment plan is still the right fit¹⁹.

Getting either one: advice first, online or by phone

Both routes start with advice. To access Breathing Space you need to talk to a professional debt adviser²⁰. For standard Breathing Space you need a referral from a debt adviser, and you can contact debt advice organisations such as StepChange, Citizens Advice or National Debtline⁷. The adviser must agree it is right for you and that you meet the rules for applying².

StepChange offers free and confidential debt advice online and over the phone, and can refer you to a fellow debt advice charity if face-to-face advice is best²¹. Its online debt advice is available 24 hours a day, and it has been helping people for over 30 years²¹. It is regulated by the Financial Conduct Authority²². You will get a reference number to show your creditors that you are seeking help²³.

For a token payment plan, the process is the same starting point: a full budget is worked out, and if it shows a deficit, a token payment plan may be set up. Payments are usually made by standing order or bank transfer. If you pay by bank transfer, include your client reference number and surname with each payment, with a space between them, for example 1234567 Smith¹⁵.

Credit file, bills and payments: what to keep up during either option

Breathing Space does not mean you stop paying everything. You still need to pay as much of your rent or mortgage as you can afford⁷. You must keep paying your ongoing rent or mortgage during the breathing period, and the scheme is not a payment holiday⁶. Even if you cannot pay anything towards rent or mortgage arrears, you still need to pay your ongoing rent or mortgage during the breathing space⁶.

Some deductions do stop. If you are having deductions taken from your benefits or wages, these will stop while you are in your breathing space⁶. The scheme pauses some deductions and other debt repayments while you get help²⁴. But deductions for ongoing fuel charges and water charges (Water Direct) will continue during the Breathing Space²⁵.

If you receive Income-based Jobseeker's Allowance, Income-related Employment and Support Allowance, Income Support, Housing Benefit, Child Tax Credit or Working Tax Credit, deductions should stop if the debt is eligible for breathing space and new deductions will not be possible⁵. If you no longer want deductions taken from benefit when the Breathing Space ends, you fill in the creditor template and include the date the Breathing Space ends and the date you want deductions to stop²⁵.

Breathing Space can be cancelled. If you do not keep paying, your landlord or mortgage lender can ask for the Breathing Space to be cancelled⁶. Other reasons include not meeting the eligibility criteria, an error in setup, not meeting your responsibilities, a creditor believing you can afford to pay, incorrect information, or an ineligible debt being included¹.

Where these options do not help, and what comes next

Breathing Space has hard limits. It cannot write off debt, cover all debts, stop money being taken from wages or benefits, last longer than 60 days, cover new debts taken out after it started, or let you stop paying other bills². It is a pause, not a solution.

The 60 days is also not always enough. Two in five StepChange clients (41%) who registered for Breathing Space said 60 days was not long enough for their situation²⁶. That is the gap a token payment plan or another solution fills.

If neither fits, the wider range of options includes debt management plans, individual voluntary arrangements, debt relief orders and bankruptcy, each with its own eligibility rules and consequences. In Scotland, the alternatives differ: you may be able to apply for a debt moratorium, and the Scottish Debt Arrangement Scheme already provides debtors with a short breathing space and a statutory repayment plan². In Northern Ireland, debt repayment options are set out separately²⁷.

Where a firm has failed or a complaint is unresolved, the Financial Ombudsman Service can look at complaints involving the cost of living²⁸. Free and impartial help is available from StepChange, Citizens Advice, National Debtline and MoneyHelper.