What is a Moratorium?
Are you thinking of applying for a debt solution such as a Trust Deed or Debt Arrangement Scheme (DAS), but need more time to mull it over and are worried about what your creditors are going to do? Then a moratorium might be the answer you need.
A moratorium is a period of time, usually six weeks, that offers those in financial distress a little breathing space. Creditors cannot take any recovery action against you in this time and is often considered to be a relief to those who need it.
If granted, it will be registered by the Accountant in Bankruptcy (AiB) on the Register of Insolvencies and the DAS Register. You will then have six weeks to make your decision whether you want to apply for a debt solution or not.
It’s important to note, however, that it’s not possible to be granted a moratorium if you have already been granted on within the last year. The only exception to this is if you have been in a joint debt payment programme within a DAS that has been revoked.
You also won’t be protected from creditors obtaining court orders – it only stops them from doing anything with the order for the moratorium period.
The benefits of a moratorium
The main benefits of a moratorium are:
- It gives you breathing space to make an informed decision
- Interest and charges are frozen
- Creditors cannot take any action against you for the six-week period
- It will continue to protect you if you enter into a debt solution such as a Trust Deed or Debt Arrangement Scheme
How to apply for a moratorium?
If you are unable to do this, you can also email them to firstname.lastname@example.org or return them by post.
It is also suggested by the AiB that you read their privacy statement before submitting your application.
How long does it take?
Usually, your moratorium can be granted within 24 hours. However, this is dependent on the AiB and their workload.
It’s always best to apply as soon as possible, especially if you are aware of impending action.
Who can use a moratorium?
This process can be used by anyone who lives in Scotland as long as they haven’t had one granted in the last 12 months. It’s important to ensure that you only explore this option when necessary for this reason to avoid leaving yourself in the lurch at a later date.
When should a moratorium be used?
It’s important to only use this process when it’s necessary. You can apply for this yourself, but it’s always best to seek advice before you do.
The most common time to use it is after you have been served a Charge for Payment or a court order. This is because it’s when a debt reaches this stage that you become more at risk of the following:
- Earnings arrestment
- Bank arrestment
- Creditors applying to make you bankrupt
Is interest paid during moratorium period?
Interest and charges are frozen once your moratorium has been granted, meaning your balances won’t increase dramatically in this time.
However, if you then decide not to proceed with your application for debt help, then this will be added back on and you will likely end up with more debt than you started off with.
If you’re struggling with debt and are looking for some help, contact us today on 0800 043 1320. Our friendly advisers are on hand to offer free and confidential advice to help you make the best decision for your situation.
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