A Statutory Moratorium provides someone 6 weeks legal protection if they are worried their creditors will act against them. It prevents creditors beginning the bankruptcy process and protects consumers from having their bank accounts frozen, or their wages arrested. It also stops their car, or any other item, being attached by Sheriff Officers.
The process is designed to allow breathing space for anyone struggling with their debts, so they can consider their options, regardless of whether those options are the Debt Arrangement Scheme, a Trust Deed or Bankruptcy (Sequestration).
Who can use a Statutory Moratorium?
Statutory Moratoriums can be used by anyone who is normally resident in Scotland, providing they have not already used the procedure in the previous 12-months.
The process for applying is free and it should not affect someone’s credit rating.
However, although someone can apply themselves, it is advisable that they seek advice first, as to be most effective the procedure should only be used when it is necessary.
If it is used too soon or when there is no risk of legal recovery action being taken, then the option may be wasted and won’t be available later if it becomes necessary.
Also, it is worth noting that a Statutory Moratorium does not stop a creditor raising a court action to obtain a decree (court order) against the consumer. It just stops them doing anything with it during the six-week period.
The best time to use a Statutory Moratorium, therefore, is when a creditor already has a court order or a Summary Warrant and can act.
Statutory Moratoriums and Bankruptcy
Also, if a creditor raises an action to make someone bankrupt through the courts, before a Statutory Moratorium has been used, applying for one at that point is too late. That’s is not to say the bankruptcy cannot be avoided, but it will be necessary for the consumer or a representative to appear at the hearing and explain what they propose to do, such as apply to the Debt Arrangement Scheme, which can stop a bankruptcy being awarded.
How do you apply for a Statutory Moratorium?
The process for applying for a Statutory Moratorium is relatively simple. A Form 33 must be completed and returned to the Accountant in Bankruptcy. It can either be emailed to firstname.lastname@example.org or posted to:
Accountant in Bankruptcy
1 Pennyburn Road
What Happens Next?
Sheriff Officers should search the Register before they take any action to ensure the person that has applied is not on it. If they are, they should not take any further action until the Moratorium expires.
However, in practice, they don’t always do this, and Charge for Payments get served and bank accounts get arrested. However, where something does happen an extract from the Register can be sent to the Sheriff Officer to show their actions were incompetent and they then must reverse their action as quickly as possible.
The Register of Insolvencies
The Register of Insolvencies is a public register, and anyone can access it online.
However, to find someone, you need to know their name, address, and date of birth, so it is not easy to trawl and find people. The reason it is public, is so creditors and Sheriff Officers can search it before taking action.
The information stored on it is only publicly available for 6 weeks and is then removed, although the application is kept for 12 months to ensure that a second application is not made in that time.
Can the Moratorium Period be Extended?
Once the six-weeks are up, they are up, and you lose your protections, unless you make an application to the Debt Arrangement Scheme within the protection period. The Moratorium period is then extended until that application is decided. Alternatively, you continue to be protected if your Trust Deed becomes Protected or your bankruptcy is awarded, but only in relation to the debts that you included in your trust deed or bankrutpcy.
As you are only protected for six-weeks and it can pass quickly, it is best to speak with an Adviser first to see if:
- It will be possible to get an appointment in that time; and
- Is it advisable to use the Statutory Moratorium procedure at that point.