If you are worried that you may be at risk of Sheriff Officers taking action against you, a Statutory Moratorium is a legal device that you can use to protect yourself.
Statutory Moratoriums also protect you from Creditors making an application for you to be made bankrupt.
Previously, Statutory Moratoriums only gave you six weeks protection from a Sheriff Officer taking action against you, like Arresting your Bank Account or Freezing your wages. However, in response to the Covid 19 crisis, the Scottish Parliament has passed emergency legislation that extends that protection to six months now.
It can also stops items like cars, or any other item, being attached.
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).
During the Covid 19 crisis, they can also be used to buy you time, until the crisis is over, so you can review your options when you have more information.
Who can use a Statutory Moratorium?
Statutory Moratoriums can be used by anyone who is normally resident in Scotland.
Previously you could only use one in any 12-month rolling period. However, under the emergency legislation that has been introduced to respond to the Covid 19 crisis, that restriction has now been removed.
The process for applying is free and it will not affect your credit rating, although if you miss payments to debts where the creditors normally report missed payments to Credit Reference Agencies, it may damage your credit rating.
It is, however, advisable that you 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 it may be pointless.
Also if you have been maintaining your payments to your agreements and are unable to make payments to them because of the Covid 19 crisis, it may be better for you to apply to your creditors for a payment break. They may not stop interest and charges being applied to your debts, but they won’t report the payments as being missed to credit reference agencies.
It is worth noting that Statutory Moratoriums do not stop a creditor applying interest, charges or fees to your debts, so the amount owed can increase whilst you are in one.
For that reason, if you can agree a payment break with your creditors, this may be better.
Also Statutory Moratoriums do not stop prevent creditos raising a court action to obtain a decree (court order) against the you. It just stops them doing anything with it during the six month 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
If a creditor raises an action to make you bankrupt through the courts, before a Statutory Moratorium has been used, applying for one at that point is too late. It only stops them raising the Bankruptcy Petition if you apply for the Statutory Moratorium before they do so.
That’s is not to say the bankruptcy cannot be avoided, but it will be necessary for you, or a representative, if you can get one, to appear at the hearing and explain what it is your are proposing to do, such as applying 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. They should also remove any fees that were applied to your debts.
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 months and is then removed.
Can the Moratorium Period be Extended?
Once the six-months are up you lose your protection.
At this stage it is not known if the emergency provisions contained in the Coronavirus (Scotland) Act 2020 will be extended. At present they are due to expire on the 30th September 2020, but Scottish Government Ministers have the power to extend them for 6 months, then another 6 months if they choose to.
If they are extended it may be another application for a Statutory Moratorium could be applied for when the first one comes to an end.
Ideally, however, during the protection period it is important to seek advice.
If it is appropriate to make an application to the Debt Arrangement Scheme (DAS), or grant a Trust Deed or apply for bankruptcy, this should be done within the protection period. The Moratorium period is then extended until the DAS application is decided, or the Trust Deed is protected or rejected, or the bankruptcy application is decided.
Statutory Moratoriums should only be used as a temporary measure when you are facing action from Sheriff Officers or Creditors are threatening to make you bankrupt.
During a Statutory Moratorium, your debts can increase and your credit rating can be damaged if you don’t pay your debts.