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Challenges to the Mental Health Crisis Moratorium

DistressFollowing a complex case, in January of this year a Mental Health Crisis Moratorium was successfully cancelled alongside an injunction being granted preventing future moratoria from being applied for. This is a ground breaking judgment, taking place just two years after the Debt Respite Scheme first came into force. But will this now change how the scheme is used? Or will this open the door for future abuse of it? We explore what happened.

In July 2018, a judgment was handed down to a defendant who owed a claimant several hundred thousand pounds in damages. In the few years that followed, the defendant obtained one Breathing Space Moratorium and four Mental Health Crisis Moratoria, blocking the claimant from being able to take further action to retrieve their money.

Believing that the moratoria process was being abused, the claimant applied to the court to have the most recent Mental Health Crisis Moratorium cancelled (under Regulation 19), and an injunction granted to prevent the defendant from obtaining a further Mental Health Crisis Moratorium. The claimant had obtained a Charging Order over the property of the defendant and had attempted to evict her under an Order for Sale. But her repeated attempts to prevent this eviction through the Debt Respite Scheme, which involved various moratoria coming to an end and then new ones being granted within a day or so of termination, made it virtually impossible for the Judgment to be enforced.

Following a very complex case, it was finally on the fifth Mental Health Crisis Moratorium that the claimant was able to find some success. It was through this application that the Judge considered three key issues.

The first related to the type of mental health issues that may entitle an individual to a Mental Health Crisis Moratorium, and it was determined that the defendant didn’t satisfy the “crisis, emergency or acute care or treatment”.

The second related to whether the existing Moratorium should be cancelled, in which the Judge noted that the debt owed was “substantial” and “longstanding”, and there had been no attempts made to discharge it. The Judge ultimately determined that the claimant had been unfairly prejudiced by the application.

The final consideration was whether the defendant should be restrained from seeking a further Moratorium. It was decided that should an injunction not be granted, there was a definite risk that a further Moratorium would be sought by the defendant, further delaying and frustrating the claimant’s case.

Finally, in January 2023, the claimant was successful in their application.

The Future

This case will undoubtedly have an effect on the future of the Debt Respite Scheme. It shines a light on the potential abuses of the system, and focuses in on what the scheme is actually there for.

It is absolutely right that moratoria should be easy to obtain for individuals who need that protection. But this case has also shown that it should not come at the financial expense of another individual without due justification.

As with any scheme such as this, the abuse of it must be sought out and restrained, and it will be a relief to creditors to know that they can apply to have such dubious moratoria reviewed and potentially cancelled. It is only right that the system can be challenged in this way.

But we must also make sure that the scheme remains balanced. Knowing that one case has been successfully won, will more creditors try to question the validity of moratoria in the hope that they too might be able to overturn them?

The criteria for the scheme is well documented, and our guess is that those applying for a Mental Health Crisis Moratorium will have to prove more stringently that they meet the criteria, perhaps even with medical backing. The scheme is there for a purpose to protect these people, not to be used as a scheme for evading debts and eviction. In this case, it seems that it was a real win for the claimant. But how this will now translate to future similar cases, it will be interesting to see.