What is Scotland’s Breathing Space?
If Sheriff Officers arrest your wages? What can you do?
If they freeze your bank account, what options are available?
If someone you owe money to wants to make you bankrupt, can you stop them?
The truth is there is nothing immediate you can do, nothing that stops these types of actions straight away unless you act first.
However, if you act before these types of debt recovery procedures are used and use a Statutory Moratorium, Scotland’s breathing space procedure, then you can stop them from occurring in the first place.
What is a Statutory Moratorium?
A Statutory Moratorium is a legal procedure that exists in Scot’s law which provides you with six week’s protection from any actions that Sheriff Officers can use to recover a debt and also protects you from any creditor raising a court action to make you bankrupt.
It is free to apply for and is added to the public Register of Moratorium on the same day. The reason for this is so sheriff officers can check it before they take any action. If they see your name on it, they are not allowed to act.
It does not affect your credit rating.
However, you can only apply for a moratorium once every twelve months. So if you do use the procedure, it is best to get advice first, so you don’t use it unnecessarily.
When should you use a Statutory Moratorium?
As you can only use the Statutory Moratorium procedure once a year, you do not want to use it unless it is necessary and without first seeking advice, although you can apply for it yourself.
When you should use it is once a Charge for Payment has been served or a court order has been granted against you (a Charge for Payment is a legal demand for payment that a Sheriff Officer gives you).
The reason for this is, it is only when one of these events occurs that you are at risk of the type of debt recovery action that a Statutory Moratorium protects you against.
What are the solutions?
There are various solutions you can use with the Statutory Moratorium procedure to help you with your debts.
The first of these is:
The Debt Arrangement Scheme
The Debt Arrangement Scheme is an ideal solution for someone who does not want to go bankrupt or enter into a Protected Trust Deed and can repay their debts within a reasonable period of time. It allows all of someone’s debt to be repaid through what is known as a statutory repayment plan and freezes all interest, charges, and penalties. It also protects you from the type of debt recovery action mentioned above, for as long as you are in it.
Also, when used alongside the Statutory Moratorium procedure, providing you apply within the six weeks, it extends the protection period you have until your application is approved.
Where you have not been able to use the Statutory Moratorium procedure before a creditor arrests your wages, it also has the effect of stopping the earning arrestments once it is approved.
Protected Trust Deeds
The Statutory Moratorium procedure can also be used to allow you to apply for a trust deed from your creditors. A Trust Deed allows you to include all your debt in it whilst only making one payment per month. It also protects you from your creditors for a period of normally four or five years. At the end of the Protected Trust Deed, your debts are written off when you receive a discharge.
Like with the Debt Arrangement Scheme, a Protected Trust Deed will stop any wage arrestment that has been applied before you used the Statutory Moratorium procedure.
One of the added advantages of using the Statutory Moratorium procedure with a Trust Deed is a Trust Deed does not protect you immediately until your creditors agree to it. This means there can be a five-week waiting period when actions can still be taken. The Statutory Moratorium procedure can provide you with protection during those five weeks.
The final procedure that a Statutory Moratorium can be used alongside, is Sequestration, or as it is commonly known, Bankruptcy.
Bankruptcy is a debt solution that is suitable for someone who cannot repay their debts within a reasonable period of time and is looking to make a one-off payment or cannot afford to make any payments towards their debts.
Although you are normally discharged from your bankruptcy within one year, where you can afford to pay something, you need to pay it for four years.
Bankruptcy can have a damaging effect on your credit rating and may not be open to everyone, depending on their occupation.
If you are worried about problem debts and have been receiving paperwork from the courts or Sheriff Officers, you could be a risk of legal debt enforcement action being taken against you.
If you are in this position and want to know how to protect yourself, speak with a Carrington Dean adviser today on 0808 2085 195.