Yesterday 04 May 2021 a debt respite scheme which cuddles debtors who are individuals over 18 and hits creditors came into force. The breathing space moratorium (BSM) and the mental health moratorium (MHM) have been introduced in England and Wales under the Financial Guidance and Claims Act 2018. Both are accessed through an approved debt counsellor or the local authority.
With a moratorium in place, creditors will be prevented from taking enforcement action in respect of a debt whether it has accrued before or after 04 May 2021 or require the payment of interest, fees, penalties or charges during the moratorium period. The BSM lasts for 60 days. The MHM period is the total of the debtor's mental health crisis period plus 30 days but that could be followed by a BSM 60 days. The BSM may be applied for annually. The MHM can be applied for as and when a mental health crisis recurs, without limit.
Not all debts qualify. In are those under a warrant of possession, court judgment and personal and crown debts. Out are secured debts (generally), business debts if the debtor is VAT registered or in partnership and the debt relates to the business and debts which mirror the bankruptcy discharge exemptions. A charging or attachment of earnings order made before 04 May 2021 will be unaffected.
With a BSM, the debtor must keep up certain defined payments which accrue during its currency including taxes and mortgage instalments. Failure to do could lead to cancellation of the BSM at a midway review by the debt counsellor. A creditor can ask for a review of either moratoria within 20 days of its inception and can apply to the county court for cancellation if the review goes against them.
The court or a tribunal may grant permission to a creditor to take an enforcement step either before or after they have started proceedings. In the absence of permission, any bankruptcy petition pending against the debtor based on a debt which qualifies for a moratorium must be halted. Any application or appeal to the county court allowed by the moratoria should be made by application notice in form N244. A fee of just £5 has been set for a county court appeal by a debtor who is aggrieved by a refusal to have their usual residential address disclosed to creditors.
You will find highly digestible guidance on the moratoria at gov.uk/government/publications/debt-respite-scheme-breathing-space-guidance if you want more.
A knock-on effect of these new laws is that the notice (form 3) which a landlord after possession of their property and relying on rent arrears is required to serve on their tenant before they can begin court proceedings - it's called a notice seeking possession - has been amended as from 04 May 2021. The new form draws attention to the fact that it cannot be served where a moratorium is in force, without county court or tribunal permission.