The Bankruptcy and Diligence (Scotland) Bill includes the power to bring in a pause on debt recovery action until six months after the person has finished treatment.

People may be eligible to apply for the mental health moratorium if:

• they are receiving crisis mental health care
• a mental health professional has confirmed that their debt is contributing to their mental illness or is hindering their recovery

Further detail of how the moratorium will work is included in separate regulations now before MSPs and will be subject to a public consultation.

The bill also makes a number of technical changes to the Bankruptcy (Scotland) Act 2016, such as clarifying the time periods for appeals against decisions by the Accountant in Bankruptcy, the organisation responsible for overseeing bankruptcies. It also makes some minor changes to the law covering how debt recovery is carried out in Scotland.

Public Finance Minister Ivan McKee said: “Mental health problems can have a significant impact on a person’s ability to manage their finances. This legislation will give them breathing space during which creditors cannot contact them, enabling them to complete their mental health treatment and access money advice services.

“There has been broad support for the mental health moratorium and we will continue to work with our partner organisations as we put the new system in place.”

Chief executive of the Accountant in Bankruptcy, Richard Dennis, said: “It has been good to see those with an understanding of debt and those with an understanding of mental health crises coming together to design an approach that can offer hope to those facing both these concerns.”

Jo Anderson, director of influence and change at SAMH (Scottish Action for Mental Health), said: “The relationship between poor mental health and debt is well established: debt problems can lead to mental health problems, and mental health problems can result in debt.

“The passage of this bill, which makes it possible to create a debt moratorium for people with mental health problems that prioritises mental health recovery over the recovery of debt, is really welcome.

“We look forward to working with the Scottish government and partners to ensure that a moratorium provides robust protections and is accessible to everyone that needs it.”