"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"
- Jonathan Newman - Brightstone Law LLP
The Court of Appeal has clarified how the term “arrears” should be interpreted under the Debt Respite Scheme, in a ruling with significant implications for bridging and secured lenders.
In a judgment handed down on 6 June 2025 in the joined cases of Forbes v Interbay and Forbes v Seculink, the court addressed whether a mortgage capital sum, once called in by a lender, qualifies as “arrears” and is therefore protected during a moratorium period.
The Debt Respite Scheme, established under the Breathing Space and Mental Health Crisis Moratorium Regulations 2020, provides temporary relief from enforcement, interest, fees and charges for eligible individuals in debt. The scheme includes a 60-day standard moratorium and an extended version for those receiving mental health crisis treatment.
This was the first time the Court of Appeal examined how these protections apply to secured debts, particularly in cases where the full capital balance of a mortgage has been demanded before the start of a moratorium.
Mr Forbes had taken out a £1.3 million interest-only mortgage from Interbay, secured against his property. After defaulting, he was served a demand for repayment of the full capital balance. In July 2022, he entered a mental health crisis moratorium. Despite this, Interbay began possession proceedings in May 2023, citing the unpaid capital. Forbes argued that the called-in amount should be classified as “arrears” and therefore subject to moratorium protections.
Under the regulations, “arrears” are defined as unpaid amounts, excluding capitalised mortgage arrears, that became due before the moratorium began. However, secured debts that do not meet the definition of arrears are explicitly excluded from protection. The central legal question was whether the called-in capital sum fell within this definition.
The Court of Appeal concluded that it did not. The principal sum of a secured debt, even if demanded in full before the moratorium, is not considered a qualifying debt or a moratorium debt.
“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,” said Jonathan Newman, senior partner at Brightstone Law LLP. “It confirms that called-in capital does not qualify as moratorium debt, resolving a point that had created considerable uncertainty in practice.”
The decision clarifies a key grey area in the application of the Debt Respite Scheme and provides reassurance to lenders regarding the enforceability of secured lending during a moratorium period.
