Scotland’s new Mental Health Moratorium

Scotland's introduction of its first Mental Health Moratorium by summer 2025 marks a pioneering step in providing support for individuals with severe mental health issues. 

This innovative approach builds on the foundation laid by the 2015 Debt Moratorium under the Bankruptcy and Debt Advice (Scotland) Act 2014, which initially offered a 6-week relief period for those planning to address their debts.

This scheme enabled individuals to seek professional debt advice without the immediate pressure of creditor actions, earning widespread acclaim across Scotland's debt advice sector, insolvency community, and creditors alike, establishing Scotland as a leader in this area. The extension of this moratorium to a 6-month period during the pandemic was a critical adaptation to the increased difficulties in accessing financial advice during such tumultuous times. 

Looking beyond Scotland, the initiative reflects broader changes within the UK, particularly in light of England and Wales' Debt Respite Scheme introduced in 2021. This scheme expanded protections further, offering up to 60 days of relief from various creditor actions, alongside specialised provisions for individuals experiencing a mental health crisis.

The Scottish Government's proposed Mental Health Moratorium seeks to align with these advancements. By focusing on individuals receiving compulsory mental health treatment, the moratorium aims to offer targeted support that respects both the legal framework and the specific needs of those it seeks to protect. 

Recommendations from a dedicated working group emphasise the importance of aligning eligibility criteria with Scotland's mental health legislation, suggesting a flexible moratorium duration that reflects the treatment period and necessary grace periods thereafter.

This careful consideration of the long-term nature of mental health crises and the potential for frequent applications for moratoriums underscores the complex balance between supporting individuals' health and financial stability and maintaining the legitimate interests of creditors. The potential for tension highlights the importance of crafting a policy that is both compassionate and practical, ensuring that the protections offered are meaningful and sustainable.

As Scotland moves forward with the introduction of the Mental Health Moratorium, it does so with the anticipation and hope of creating a more supportive and understanding financial environment for those facing severe mental health challenges. This initiative not only reflects a significant step in recognising the intricate relationship between mental health and financial wellbeing but also sets a precedent for how jurisdictions can offer targeted support to those in need. The unfolding of this policy will undoubtedly be watched closely, both within Scotland and beyond, as a model of innovative and empathetic legislation in the face of complex societal challenges.

---

Alan Munrois a partner in Wright, Johnston & Mackenzie’s Conflict Resolution Team focussing on insolvency litigation. He acts principally for insolvency practitioners and lenders, specialising in misfeasance claims and challenges to antecedent transactions.