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Moratoriums and creditor forbearance

There are a few types of 'debt moratorium' and each have different rules. Some can pause court action and communication, and with others you do not have to make payments to your debt. This is a formal agreement and you must seek help in this time.

The people you owe may give you time to deal with your debts. This is called 'forbearance'. They may pause payments or stop interest and charges for an agreed amount of time.

It can be hard to deal with the people you owe contacting you or taking enforcement action. You can ask them to stop while you look for a debt solution.

This can be easier if you:

Most companies will give you 30 days to deal with your debts if you explain:

  • You are in financial difficulty
  • You are seeking help from a debt advice organisation

This is an informal arrangement. It is different from the formal Breathing Space scheme.

Breathing Space is a formal government scheme. It requires the people you owe to give you up to 60 days to deal with your debt. They cannot contact you or start enforcement action during this time.

It requires you to seek debt advice during your moratorium so you can deal with your debts.

You will get a client reference number during your debt advice session with us. Share this with the people you owe.

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What is a moratorium?

A moratorium is a formal arrangement available in Scotland. It is similar to Breathing Space.

It is a legal requirement on the people you owe to follow, if you apply for:

Find out more about how we help people in Scotland.

A moratorium protects you from actions by the people you owe for six months.

You can put one in place at any time if:

  • You live in Scotland
  • You are applying for one of these solutions
  • You are expecting court action while you are applying for one of these solutions

Find out how to apply on the Accountant in Bankruptcy (AiB) website.

You will get a moratorium if your debt relief order (DRO) is approved.

  • This is available in England, Wales and Northern Ireland
  • The moratorium will end when you are discharged

At the end, all the debts in your DRO will be written off.

What is creditor forbearance?

This is when you ask the people you owe to stop contacting you while you deal with your debts. It is an informal agreement.

Many will agree to stop contact for a short time if:

  • You have had debt advice, or
  • Plan to get debt advice

This can let you get help without the worry of calls from the people you owe asking for payment.

How do I ask the people I owe for time to deal with my debts?

1. Contact all the people you owe and tell them you have had advice from a debt advice organisation

You can do this by:

  • Letter
  • Email
  • Over the phone
  • In person

2. Show them proof that you are trying to sort out your debts

If you are getting debt advice from us:

  • Tell them the date you spoke to us or
  • Share the reference number we gave you
  • Give them a copy of your budget

If you are dealing with your debts on your own, explain:

  • What you have done and
  • What you plan to do

3. You can make a complaint if they do not offer forbearance and you feel this is unfair

Why do creditors provide forbearance?

Most lenders want to help you deal with your debts. Helping you get debt advice benefits both you and them.

Most major UK lenders and debt collectors are covered by industry codes of practice that require them to offer forbearance.

These include:

Any members of these organisations should give you forbearance if you tell them you are getting debt advice.

Other codes of practice may include similar rules to offer forbearance.

How long does this type of forbearance last for?

Forbearance lasts for 30 days but can be extended if the people you owe think you need more time to deal with your debts.

The 30-day period is meant to give you time to work out:

  • How to deal with your debts
  • How much you can pay to your debts each month
  • Whether a debt solution, like a debt management plan, would help you

They can give you an extra 30 days if you let them know you need more time.

Find out more about your rights when dealing with debt problems.

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Do all creditors offer forbearance?

No. Most large companies are covered by codes of practice, but smaller lenders may not be.

The forbearance requirements apply mainly to consumer credit debt, such as:

  • Bank accounts
  • Credit and store cards
  • Personal loans
  • Catalogues
  • Car finance

This help is not available with some types of debt. Like priority debts such as:

  • Fines
  • Court judgments or decrees
  • Rent arrears
  • Council tax arrears
  • Child maintenance (CSA) arrears

Will a moratorium or creditor forbearance affect my credit file?

Any payment you miss during forbearance may be recorded on your credit file. This could make it harder to get credit in future.

Breathing Space does not directly affect your credit score as it is not recorded on your credit file. But missed payments are recorded on your credit file as normal, which may make it harder to borrow in future.

It may be harder to borrow from a creditor who knows you had Breathing Space in the past. Especially if it was with the same lender such as a bank.

A moratorium should not impact your credit file.

I am dealing with mental health issues. What help can I get to deal with my debts?

You may be able to apply for mental health crisis breathing space if you are struggling with debts and your mental health.

Or, you can complete a debt and mental health evidence form (DMHEF). You must ask a mental health practitioner to help you, as StepChange is not approved to do this.

A DMHEF is mostly used to tell the people you owe that you are experiencing mental health issues. It can help with arranging agreements with forbearance, but does not have much to do with applying for mental health crisis breathing space.

Needing forbearance could be a sign that you need debt advice. Use our online debt advice tool to get started.

"Get in touch with StepChange, you'll wish you'd done it sooner" Rob, Wiltshire