What this type of mortgage (refinancing or new) does is clear up these issues and allow the client to build up their credit status. Any arrear is a red flag to banks.
The client would not be able to refinance their bank loan with any of the debts/arrears.
I work with the Equity of the home and the more the better.
What I usually do is advise my clients to keep renewing their bank loan but get a second mortgage to pay these debts/arrears.
Clients can be in a good financial situation within 2-3 years.