What is the ‘breathing space’ debt moratorium in Scotland?

How to apply for a six-month debt moratorium on creditor action

The breathing space debt moratorium in Scotland enables people in debt to trigger a six-month period that’s free of creditor action, so they can take stock of their situation and formulate a plan.

Prior to coronavirus, a moratorium of six weeks was available, but this was extended to six months via new coronavirus legislation in 2020. In a further development, the Scottish government is now proposing that the six-month debt moratorium is ultimately made permanent.

A breathing space moratorium also exists in England and Wales, but the Scottish Moratorium on Diligence is a separate remedy exclusively for Scottish residents. So what does this mean if you live in Scotland and are in serious debt?

What does the Scottish debt moratorium mean in practice?

Here are the main points regarding the breathing space moratorium in Scotland:

• Diligence is the enforcement of debt, so the moratorium means your creditors are unable to take legal action against you for its duration. Intended enforcement action might have included arrestment of earnings, for example, or bank arrestment.
• You can investigate whether a formal debt procedure would be appropriate in your circumstances, without the threat of creditor action. If you entered into a Scottish trust deed, for instance, the protection would continue as long as you kept up with the repayments.
• You may be granted a moratorium on debt more than once in a 12-month period – the initial restriction limiting the number has been removed by the Scottish government.
• You don’t need to obtain debt advice from a money adviser to apply for the moratorium, although it is advisable to do so.
• A creditor can still apply for judgments to be made against you in court, but cannot action these judgments or decrees whilst the moratorium is in force.

How to apply for the Scottish breathing space moratorium

If you have unsustainable debt, you may be eligible to apply for the Scottish moratorium. If so, you can make your application directly to the Accountant in Bankruptcy (AiB). Debt advisers and insolvency professionals can also apply on your behalf.

It’s recommended that you seek professional advice on your debt situation, which is typically free from a number of sources, including debt advice charities and approved money advisers. Licensed insolvency practitioners (IPs) also commonly offer initial guidance free-of-charge.

Applications are made via the Register of Insolvencies website and once submitted will be reviewed by the Accountant in Bankruptcy. If the moratorium is agreed, it will appear on the public register.

How can a debt moratorium help you?

The Scottish breathing space moratorium offers vital protection from serious creditor action. Creditors are prevented from forcing you into bankruptcy, for example. The six-month time period allows you to take the most appropriate course of action - crucially, without rushing into it.

The process reduces the stress associated with being in severe debt, protects your mental health, and gives you the time needed to improve your financial position or employment situation.

Entering into a formal debt procedure is a significant step to take, and one that affects your life long-term. You need this time to make sure you choose the best option according to your circumstances, and escape debt for good.

Scotland Debt Solutions has been helping Scottish residents to escape debt since 1989, and can provide the reliable advice you need in this situation. If you would like to know more, please get in touch to arrange a free, same-day meeting. We operate a network of offices in Scotland, and can clearly present your best options.