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Navigating the nuances of debt respite regulations

Posted on 19 March 2024

Breathing Spaces and Mental Health Crisis Moratoriums (MHCM) were introduced by the Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 (the "2020 Regulations").

They are designed  to  allow individuals facing financial strain and/or suffering from mental health crisis to obtain a period of reprieve from action by their creditors while they deal with their financial or medical issues. However, whilst such support is often appropriate and necessary, in the short time since the 2020 Regulations were introduced there have been a number of challenges to their (mis)use by debtors facing significant legal liabilities.

Previous articles have detailed the High Court's decisions in Kaye v Lees [2023] EWHC 152 (KB) and the subsequent judgment in Kaye v Lees [2023] EWHC 758 (KB). In these judgments, the court grappled with the potential for abuse of the 2020 Regulations in the context of MHCMs, and set boundaries for their application. In particular, these cases demonstrated the complexities in applying the courts' power to cancel such moratoriums where they have been improperly obtained.

The Government has sought to address some of the difficulties that have arisen in relation to the 2020 Regulations by issuing guidance for both creditors and the Debt Advisors empowered to approve such moratoriums. However, the recent decisions in Guy and other companies v Brake and others [2023] EWHC 3179 (Ch) and Bluestone Mortgages Limited v Stoute & Anor [2024] All ER (D) 46 (Mar) show that there remain a number of potential pitfalls for creditors dealing with such moratoria.

Guy and other companies v Brake and others

In Guy and other companies v Brake and others the court considered how to deal with the costs of an application to cancel a moratorium where the moratorium had fallen away before the court could hear the application.


The claimants had sought an order cancelling an MHCM in order to allow them to enforce a judgment against the defendants.

However, between the cancellation application being issued and the court hearing it, the third defendant, an NHS Trust, confirmed that the defendant was not receiving mental health crisis treatment that met the criteria for granting or maintaining an MHCM. As a result, the parties agreed that the MHCM would come to an end under the terms of the 2020 Regulations before the cancellation application would be heard.

The court therefore directed that there was no need to consider cancelling the moratorium. However, it would consider some residual issues, including whether the applicants could recover their costs.


The court declined to award the applicants their costs in applying to have the MHCM cancelled.

The Judge held that, having decided that it was not necessary to consider the substance of the cancellation application and the issues raised in relation to this, they were not in a position to say which party, if any, had been successful. Ultimately, to reach a conclusion on whether the claimants should be awarded their costs, the Judge would have had to reach conclusions on the issues at the heart of the original application. As the court had not had submissions or heard arguments on these issues, it could not do so. Further, it would be a "waste of the court's resources for the whole case to be heard solely for the purpose of determining costs".

Previous Decisions

It is worth noting that this is not the first time that the effect of an MHCM has been considered in this long running set of legal proceedings.

In 2022, in Brake and others v Guy and other companies [2022] EWHC 2797 (Ch), the court permitted the Guy parties to enforce a Third Party Debt Order despite the fact that the relevant defendant was subject to an MHCM. This case is therefore a useful authority on when enforcement steps can be taken despite the existence of a moratorium under the 2020 Regulations. It also demonstrates the importance of establishing clear facts at the outset of a moratorium application, particularly in relation to the limitations of an MHCM.

Bluestone Mortgages Limited v Stoute


In this case the claimant sought to enforce its rights as lender and mortgagee against a defendant borrower who was subject to an MHCM.

The claimant applied to the court for an order enabling them to enforce their rights in relation the mortgaged property on one or more of the following grounds: (i) the debts owed to it were not subject to the MHCM as they were not "qualifying debts"; (ii) the MHCM should (and would) be cancelled; and/or (iii) that the claimant did not need the court's permission to enforce its right to possession of the mortgaged property.


The Judge concluded that sums which had fallen due and payable under the loan, and were therefore "arrears", were "qualifying debts" under the 2020 Regulations. As such, these sums were protected by the MHCM. However, they also held that capital sums owed and payable under the loan prior to the implementation of the MHCM were not a "qualifying debt".  Therefore, these amounts were not protected from enforcement by the MHCM.

The Judge held that because a portion of the debt had been erroneously included as a "moratorium debt" there had been a "material irregularity" that would entitle the court to cancel the MHCM. However, the judge considered that in the circumstances it would be unfair to the defendants to cancel the MHCM on this basis alone. As the defendants had not engaged with the application, and therefore the judge did not have up to date information on their personal circumstances, they were not willing to cancel the MHCM at that time.

Finally, the Judge held that as the security held by the claimant (i.e. the mortgage) related to both protected and unprotected debts the claimant could not enforce its rights without the permission of the court. As the claimant had not made submissions as to why it should be given permission to enforce its rights, the Judge decided to adjourn consideration of this issue to a hearing of an anticipated application to cancel the MHCM on the grounds that the defendant had not been eligible to obtain it.

Implications for Creditors and Debtors 

As these cases all show, navigating the rights and obligations of creditor and debtors under the 2020 Regulations can be a minefield.

Creditors of individuals that are or may become subject to such moratoriums will need to examine the nature of the debts owed to them to determine whether they do or do not fall under the moratorium. They should also be alive to the fact that they may have a mixture of protected and unprotected debts.

Creditors will also have to weigh carefully the risks and benefits of challenging a moratorium. If they do decide to go down this route, as these cases show, it is important to consider all the potential outcomes, and gather all relevant evidence, to ensure that they are prepared for all possible outcomes.

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