Administration orders – small debts still cause big problems
Any debt is problematic if you cannot afford to repay the amount you owe. It does not matter whether the amount is £5,000 or £50,000 as living with the burden of debt is debilitating.
There are solutions for those people who owe £5,000 or less with regular income and few assets, who wish to solve their money issues. If you live in England, Wales or Northern Ireland you may be eligible to qualify for an administration order.
Administration orders explained
The reason they are called administration orders is because the court assumes responsibility for administering the debt. You can apply if you have 2 or more county court judgements (CCJs) and if the debt is less than £5,000. They will arrange a single affordable monthly pay-back plan between you and your creditors.
Your creditors will not be allowed to pursue you for payment. The court will give creditors 16 days to object to the order. Once the order is granted, however, it provides protection from further action of the debts listed on the order.
Your details will be stored on the Register for Judgements, Orders and Fines for England and Wales for six years after the order has completed. Of course, during this time you will find it harder to obtain credit for loans, mortgages, bank accounts and credit cards.
The register information includes:
- Your name and court order number
- Your name and address
- The total amount you have been ordered to pay
- The date of the order
- Date of varied order, satisfaction or revocation
How much does an administration order cost?
The court charges a fee for administering the debt, but this is not more than 10% of the debt and the charge is taken each time you make a payment. Once you have paid your debts in full, your information on the register is marked “satisfied”. If you do not pay your debts in full, your file will be marked “unsatisfied” and banks and other lenders can see this information.
To be eligible for an administration order you must:
- Have more than one high court order or county court order against you
- Have proof that you cannot afford your existing monthly repayments once your monthly outgoings have been properly assessed
- Your combined debts must be no more than £5,000
- You must owe at least 2 creditors
How long will the administration order last?
The order will last for as long as it takes to pay off the debt. For example, if you owe £1,000 and the court believe that you have enough to pay £100 per month, then the order would last 10 months
Composition order and court fees
However, if the court decides that you do not have enough funds to pay your debt in full over a reasonable period of time, they may apply for a composition order, which calls for you to pay off a significant amount of the debt. At the end of the composition order (which usually last for three years), the remainder of the debt will be written off.
Court fees are also judged on the amount they decide you can reasonably afford to pay back. For example, if you owed £1,000 and the court decided you could pay back £100 over ten months, the court would deduct 10% from every payment received and divide the rest between your creditors from the remaining £90.
Unsecured versus secured debt
Different county courts have their own policies for deciding what debts can be included on the administration order. Mainly unsecured debts are catered for, but in some authorities, secured debts and fines may be applicable. Contact a debt specialist to make sure you get the right advice for your particular set of circumstances.
Notify the courts of any change
Once you have agreed to the conditions laid out in the administration order, you must ensure you make regular payments. If your circumstances change, then the court may accept your request to amend the order to suit the change in circumstance.
It is in your best interests to contact the court immediately if you are experiencing further difficulties. In the event that the court is not satisfied with your conduct, they may choose to terminate the administration order. This will mean your creditors are granted jurisdiction to pursue you for full repayment of debts. You may be open to further legal action and petitions for bankruptcy.
When you are debt free you are also free from pursuing letters, debt collectors, anxiety and stress; most importantly you are free to focus on the things in life that really matter to you. An administration order may be just the solution you need.