Ahsan Mustafa

On 14 November, Ivan McKeen, minister for public finance, extended the consultation on the draft Mental Health Moratorium Regulations. Analysis on consultation responses had been published in July 2025. The reason for the extension was to look at other areas of diligence such as protecting funds derived from social security benefits in bank arrestments and implementing information disclosure orders.

Officials from the Accountant in Bankruptcy have been discussing matters with sheriff officers, banks, and the Scottish Courts and Tribunal Service and gathering further evidence.

The minister has also committed to consult on the protected minimum amount and the bandings used to calculate earnings arrestments. Given the concerns about unintended impacts previously expressed by local authority stakeholders, the minister wishes to firstly assess and fully understand the impact of the changes made in April by the Diligence Against Earnings (Variation) (Scotland) Regulations 2024.

Regarding the draft Mental Health Moratorium Regulations, although the analysis of the consultation responses shows clear support for the proposed process, there remain a number of areas where stakeholders are not aligned and therefore further consultation is required.

What are the draft Mental Health Moratorium Regulations?

Debt can affect anyone, often arising from illness, economic pressures, or circumstances beyond an individual’s control. While debt recovery is a standard process, it can cause stress and anxiety, particularly for people experiencing mental health challenges, physical illness, or bereavement. Recognising this, the Financial Conduct Authority (FCA) has identified the fair treatment of vulnerable consumers as a key priority across regulated sectors (Consumer Credit sourcebook 7.2, FCA Handbook).

Earlier this year, the Scottish government consulted on the introduction of a mental health moratorium for debtors meeting specific criteria. Section 1 of the Bankruptcy and Diligence (Scotland) Act 2024 provides the legal framework for this moratorium, following recommendations from the Mental Health Moratorium Working Group. Secondary legislation, the Debt Recovery (Mental Health Moratorium) (Scotland) Regulations 2025, sets out the detailed operation of the scheme.

Definitions and scope

Regulation 2 defines terms used in the regulations, including the calculation of moratorium periods and the meaning of a “bank holiday” under the Banking and Financial Dealings Act 1971.

Regulation 3 outlines what qualifies as a moratorium debt, including:

• Judicial or contractual debts
• Interest, penalties, or charges due under contracts
• Lease or tenancy obligations
• Debts secured by standard securities
• Enforcement expenses

This aligns with existing Scottish legislation, including the Debt Arrangement and Attachment (Scotland) Act 2002 and the Conveyancing and Feudal Reform (Scotland) Act 1970.

Meeting the criteria

Regulation 4 sets out the mental health and debt criteria for eligibility. Individuals already in sequestration, protected trust deeds, or debt payment programmes are ineligible.

To qualify, the debtor must demonstrate that:

• Debt contributes to, exacerbates, or hinders recovery from mental illness; and
• The individual is unable, or it would be counterproductive to recovery, to manage their debts due to their mental health condition.

Application process

Applications are made to the Accountant in Bankruptcy (AiB) via a money adviser, accompanied by written confirmation from a mental health professional. AiB may request supporting evidence to verify eligibility. Any new or corrected information must be submitted promptly.

If AiB confirms eligibility, it must notify the debtor, their representative, the mental health professional, the money adviser, and all creditors of the moratorium start date. The debtor’s name and start date are entered into the mental health moratorium register. If AiB finds the criteria are not met, it must provide reasons for the decision.

The register

Regulation 7 governs the moratorium register, which is accessible only to relevant parties notified by AiB. Creditors cannot access information about other creditors, other debts, or the debtor’s residence. However, the debtor’s trading name and business address are included.

Start and end dates of recovery periods are recorded. AiB may exclude any information deemed likely to jeopardise safety or welfare, and individuals can request specific exclusions.

Taking effect

Regulation 8 clarifies the moratorium’s impact on enforcement. Pre-existing earnings arrestment orders may still be executed. Standard moratorium under section 197(2) of the Bankruptcy (Scotland) Act 2016 end immediately when the mental health moratorium begins.

Regulations 9–11 cover moratorium duration, recovery period notifications, and review of eligibility. Within six months, AiB must confirm continued eligibility with the mental health professional and notify creditors and the money adviser.

Obligations and compliance

Debtors must pay continuing liabilities when due, avoid credit exceeding £2,000 Failure to comply may result in moratorium cancellation with at least 28 days’ notice, considering the debtor’s circumstances. Creditors must notify AiB of debt details and, for assigned debts, provide assignee contact information. Failure to comply may make the creditor liable for the debtor’s expenses.

Reviewing decisions

Debtors can request a review under Regulation 15 if AiB finds the criteria are not met. Unsuccessful reviews may be appealed to the sheriff within 14 days; the sheriff’s decision is final. Creditors may also apply for review under Regulation 16.

Moratorium may be cancelled under Regulation 17 if evidence shows unfair prejudice to creditor rights or material irregularity, but AiB may refuse cancellation if it would be unfair to the debtor. Cancellation decisions can also be appealed to the sheriff within 14 days.

Additional provisions

• Regulation 18: Procedures following a debtor’s death
• Regulation 19: Notifications provided to and by AiB
• Regulation 20: Interaction with standard moratorium on diligence

The mental health moratorium provides a framework that balances support for vulnerable debtors with the protection of creditor rights, reflecting a growing recognition of mental health as a critical factor in financial resilience.

Ahsan Mustafa is a senior associate at Aberdein Considine LLP