Statutory moratorium on diligence
A moratorium provides protection from creditor debt enforcement. This protection is available to individuals as well as the following entities:
- a trust in respect of debts incurred by it
- a partnership (including a dissolved partnership)
- a corporate body
- an unincorporated body
- a limited partnership (including a dissolved limited partnership) within the meaning of the Limited Partnerships Act 1907, or jointly by, as the case may be, the trustees, partners or members of any of those persons
Individuals can request a moratorium if they need a period of breathing space to consider whether to apply for bankruptcy, DAS or grant a trust deed.
Due to the COVID-19 pandemic, emergency legislation was enacted to temporarily extend the duration of the moratorium from six weeks to six months. In addition to this, under normal circumstances a moratorium cannot be granted more than once in any 12-month period. This rule was also set aside temporarily as a result of the pandemic. This has now been reinforced as of 30 September 2021. From 1 October 2021, moratorium protection cannot be provided where an application has been made in the previous 12 months. The Coronavirus (Recovery and Reform) (Scotland) Act continued this enhanced protection.
Overall, there were 3,268 applications for moratoria granted in 2022-23. This is 103 (3.3%) more than the figure granted in 2021-22.
Chart 2 shows the consistently decreasing trend of moratorium applications since 2015-16 until 2020-21.
In order to determine how many individuals who successfully applied for a moratorium between 2019-20 and 2022-23, and entered any one of the three statutory debt solutions, a data matching exercise with moratorium, bankruptcy (excluding creditor petitions), PTDs and DAS datasets was carried out. The important limitation here is, although we hold the most complete record of all statutory debt solutions and statutory moratorium on diligence, there is no unique identifier that would allow us to link any two of these records.
Therefore, it was necessary to carry out a data linking (or matching) exercise. This is a process that temporarily brings together two or more sets of administrative data in order to produce statistics on how many accepted moratoria on diligence eventually lead to a statutory debt solution. It is rare for all entries in each administrative database system to be error-free, and each administrative database system is not standardised across systems.
For this reason, we have adopted the inexact (fuzzy) matching exercise which purpose is to identify the likelihood that two records are a true match based on whether they are similar or not on the following identifiers: first name; surname; current addresses; postcode; date of birth. Note previous addresses are not considered, and the future work programme may include previous addresses.
Consequently, there is a small chance that a low number of erroneous false positive matches have been accidentally included in this analysis. Similarly, the exercise could incorrectly exclude the false negative matches that are considered true matches. While great care has been taken to ensure the figures derived from the matching exercise are accurate, caution is needed when interpreting such figures.
With this limitation in mind, based on the data matching exercise there were 2,495 individuals who successfully applied for a moratorium between 2019-20 and 2022-23, and entered any one of the three statutory debt solutions. Of those 2,495 individuals, around 51.6% entered bankruptcy, 14.1% entered a PTD and 34.3% entered a Debt Payment Programme (DPP) under DAS.
- First published
- Wednesday, 2 August 2023
- Last updated
- Wednesday, 2 August 2023
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