Breathing space moratoriums

A breathing space moratorium prevents creditors, including landlords and mortgage lenders, from taking enforcement action against debtors who are not able to pay.

This respite period lasts up to 60 days.[1]

There is no limit on the number or sum of the debts included in the breathing space moratorium.

Qualifying for a breathing space moratorium

To qualify for a moratorium, an individual must show that they:[2]

• owe a qualifying debt to a creditor

• usually reside in England or Wales

• are not subject to a debt relief order, bankruptcy or an individual voluntary arrangement

• have not had a breathing space moratorium in the last 12 months

Guidance

Guidance for creditors and money advisers is available from the Insolvency Service.

To qualify for a breathing space moratorium, a debtor must get debt advice from either:[3]

• a local authority

• a debt adviser authorised by the Financial Conduct Authority

Before starting a breathing space moratorium, a debt advice provider must check that:[4]

• the debtor is unable, or is unlikely to be able, to repay some or all their debt

• a breathing space moratorium would be appropriate

There is no complete list of qualifying debts. Common examples of debts that can be included in the moratorium are:[5]

• rent and mortgage arrears

• consumer credit debts such as loans and credit cards

• utility and fuel arrears

• benefit overpayments

• council tax arrears

The moratorium only applies to debts owed at the point of application.[6]

The moratorium applies to additional debts owed to the same creditor if they have already been notified of the moratorium in relation to one debt.[7]

Non-eligible debts

Some debts cannot be included in the moratorium. These are called non-eligible debts. Examples of non-eligible debts include:[8]

• student loans

• business debts

• child maintenance

• the principle sum owed under a mortgage

For a debt to be included it must be a liquidated sum. A liquidated sum means a defined amount of money payable immediately or on a certain date in future. An order for costs to be assessed at a future time is not a liquidated sum and cannot be included in the moratorium.[9]

A creditor cannot take any enforcement action in respect of a moratorium debt while the moratorium is in place.[10] Enforcement action includes starting any action or legal proceedings against a debtor relating to non-payment of a moratorium debt.[11]

Interest and charges on moratorium debts are frozen during the moratorium period.[12]

When protections start

A debt adviser enters details of the debt into a register maintained by the Insolvency Service. The Insolvency Service sends creditors a notification of the qualifying debts and the start date of the moratorium.

The moratorium starts the day after the adviser puts the debtor's details on the register. In practice, most debtors have their details entered into the register on the same day, so the moratorium protections start on the following day.[13]

Mortgage arrears

Lenders must not:

• demand the payment of mortgage arrears included in the moratorium

• charge interest on the arrears

Mortgage lenders can still charge interest on the mortgage principal. The mortgage principal is the outstanding amount minus the arrears.

Possession proceedings for rent or mortgage arrears

Once the moratorium begins, a landlord or lender cannot:

• give an occupier notice to leave due to arrears

• issue a possession claim for arrears

• apply for a warrant to evict an occupier for arrears

A landlord or lender can take steps to evict an occupier for reasons other than arrears. For example, a landlord can start a possession claim on antisocial behaviour grounds.

Find out more about moratoriums and possession proceedings.

Existing court proceedings

A court or tribunal must take all necessary steps to ensure that any action or proceeding to enforce a court order or judgment concerning a moratorium debt does not progress during the moratorium period.[14]

Joint debtors

A creditor cannot take any enforcement action against a joint debtor while the moratorium is in place.[15]

Guarantors

Guarantor loans can be included in a moratorium, but the protections do not extend to the guarantor.[16]

Creditor contact and harassment

A creditor or their agent must not contact a debtor regarding the enforcement of a moratorium debt.[17] A creditor might be harassing a debtor if they contact them regarding enforcement.

Creditors can give notices and statements about the arrears if required under the Consumer Credit Act 1974 or Financial Conduct Authority Handbook rules.

A debtor can complain to the Financial Ombudsman about creditors who are authorised by the Financial Conduct Authority.

Find out more about making a complaint about a lender on Shelter Legal.

The debtor remains liable for moratorium debts during and after the moratorium period. They are still obliged to make other payments that fall due in the meantime. For example, contractual loan payments, or ongoing rent or mortgage instalments.

Creditors can continue to accept payments for moratorium debts during the moratorium period.

Suspended possession orders

Rent arrears and costs under a suspended possession order (SPO) are qualifying debts for a moratorium, and a landlord cannot force a debtor to make payments.

The debtor can continue to make payments under an SPO during a moratorium period.

It is a breach of the SPO terms if the debtor chooses not to make payments under an SPO. The landlord might apply for a warrant to enforce the possession order after the moratorium ends.[18]

The debt advice provider must review the breathing space moratorium no earlier than 25 days and no later than 35 days after the moratorium starts.[19]

After the review, the debt advice provider must cancel the breathing space moratorium if:[20]

• their client fails to comply with their obligations

• a debt solution is in place to deal with the moratorium debts

• they cannot contact their client

The debt advice provider can decide not to cancel the moratorium if the debtor's personal circumstances would make cancellation unfair or unreasonable, or the debtor has failed to pay an ongoing liability because they do not have the means to do so.[21]

Creditor requests a review

A creditor who receives notification of a moratorium can request a review of the moratorium on the grounds that either:[22]

• the moratorium unfairly prejudices the interests of the creditor

• there has been material irregularity

There is a material irregularity if:[23]

• the debtor did not meet the eligibility criteria for a breathing space moratorium

• a debt included in the moratorium is not a qualifying debt

• the debtor has sufficient funds to pay their debts as they fall due

A creditor must request the review within 20 days from the start of the moratorium. If the moratorium includes an additional debt, the creditor must request the review within 20 days from when this takes effect.[24] The creditor must make its request in writing, state review grounds, and provide evidence.[25]

The debt advice provider must conduct a review and inform the creditor of the outcome within 35 days after the moratorium started. A creditor request for a review can be completed as part of the debt advice provider's midway review.[26] The provider can cancel the moratorium if they agree there are sufficient grounds.[27]

The debt advice provider can decide not to cancel the moratorium if the debtor's personal circumstances would make cancellation unfair or unreasonable.[28]

Creditor applies to court

The creditor can apply to court to request cancellation of a breathing space moratorium if the debt advice provider decides not to cancel following the creditor's review request.

The creditor can apply on the grounds that either:[29]

• the moratorium unfairly prejudices the interests of the creditor

• there has been material irregularity

There are costs risks for the debtor and the debt advice provider if the creditor makes an application to court.

A creditor can apply to court to ask for permission to enforce a moratorium debt.[30] The court will only grant permission if it will not be detrimental to the debtor or will not significantly undermine the moratorium protections.[31]

After the moratorium ends, all debts are still owed. This includes debts covered by the moratorium and any new debts that became due during the moratorium.

Once creditors are aware that the moratorium has ended they can take steps to enforce their debts and can resume or start legal proceedings. They can apply interest, fees, penalties, and charges from the end of the moratorium.[32]

Creditors cannot ask the debtor to pay interest, fees, penalties, and charges that would have accrued during a moratorium unless a court has ordered this.[33]

Find out more about where to get debt and money advice.

Professionals who deal with debt cases on behalf of clients can get advice from Shelter's Specialist Debt Advice Service.