A draft version of the Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 was published and laid before Parliament on 15 July 2020 and has recently been amended. You can access the draft Regulations here, and the explanatory memorandum here.
The Regulations seek to introduce two separate moratoriums for debtors and most of the Regulations are expected to come into force from 4 May 2021. We have set out the effect of, and the eligibility requirements, for each moratorium further below.
The effect of the moratoriums
During the moratorium, creditors must refrain from charging interest, fees, penalties or charges. The creditor will also be unable to take any enforcement action in respect of the debt or instruct an agent to enforce.
The term "enforcement action" is widely defined. Creditors will be unable to: commence legal proceedings, apply for judgment, obtain a warrant, enforce a judgment, take steps to collect a moratorium debt, serve notice to take possession of a property, petition for bankruptcy, or contact a debtor for the purpose of recovering/ enforcing a debt. These restrictions will also apply to joint debtors, irrespective of whether they themselves are subject to the moratorium.
If a debtor enters a moratorium whilst legal proceedings are ongoing, then the creditor must inform the Court. During the moratorium, the courts must take all necessary steps to ensure that any action or proceedings to enforce a court order or judgment concerning a moratorium debt does not take place during the moratorium period, although the proceedings may continue until the court makes an order or judgment in conclusion of such proceeding.
Equally, if the debtor enters a moratorium whilst a creditor presents a bankruptcy petition to the court then the petition must be stayed by the court until the moratorium ends.
Breathing Space Moratorium
For a debtor to benefit from the 60 day Breathing Space Moratorium, the debtor must seek professional advice from an authorised person (which must be an FCA regulated debt advisor, or an organisation which qualifies for exemption) or a local authority and apply to their advisor for a moratorium. It will then be for the advisor to correspond with the Secretary of State (i.e. the Insolvency Service) to formalise the moratorium, who then maintain a central private register of persons in moratoria.