Court of Appeal clarifies meaning of “Arrears” under the Debt Respite Scheme

02 July 2025

The Court of Appeal has provided clarity on what qualifies as “arrears” under the Debt Respite Scheme (the Breathing Space and Mental Health Crisis Moratorium Regulations 2020), in a ruling that will have significant impact on bridging lenders.

On 6 June 2025, the Court of Appeal handed down a significant judgment in Forbes v Interbay and Forbes v Seculink, providing much-needed clarity on what qualifies as “arrears” under the Debt Respite Scheme (the Breathing Space and Mental Health Crisis Moratorium Regulations 2020).

The central issue was whether a mortgage loan’s capital sum - once called in by the lender - could be treated as “arrears” and therefore protected during a moratorium. Mr Forbes, the borrower, argued that it could; the lenders disagreed.

The Debt Respite Scheme offers temporary protection from enforcement, interest, fees, and charges for individuals in debt, provided certain conditions are met. The scheme includes a 60-day standard moratorium and a longer mental health crisis moratorium, which continues for the duration of treatment.

This case marked the first time the Court of Appeal had considered how these protections apply to secured debts—particularly mortgage capital sums that have been demanded in full.

Mr Forbes took out a £1.3 million interest-only mortgage from Interbay, secured on his property. After he defaulted, the lender called in the full balance. Forbes later entered a mental health crisis moratorium in July 2022. Despite this, Interbay began possession proceedings in May 2023 based on the outstanding capital. Mr Forbes argued that because the capital had been called in before the moratorium began, it constituted “arrears” and was protected from enforcement action.

The Regulations define “arrears” as unpaid amounts (excluding capitalised mortgage arrears) that became due before the moratorium. Secured debts that are not arrears are specifically excluded from protection. The key question was whether a called-in capital sum could fall within this definition of “arrears.” If so, it would be protected from enforcement during the moratorium.

The Court of Appeal decided that the principal sum of secured debt, whether or not called in prior to the commencement of the moratorium, is non-eligible debt and thus neither a qualifying debt nor a moratorium debt.

Jonathan Newman, Senior Partner at Brightstone Law LLP said:

“The ruling provides welcome certainty for creditors, reinforcing that the moratorium scheme is not intended to restrict enforcement of secured lending beyond missed instalment payments. It confirms that called-in capital does not qualify as moratorium debt, resolving a point that had created considerable uncertainty in practice.”