To learn more and find out whether it might be right for your circumstances, read on as we take a deeper look at this form of debt solution.
What is an administration order in the UK?
An administration order (sometimes shortened to AO) is a legally binding arrangement, issued by a County Court, that enables you to pay back what you can afford towards your debts from any money that remains once you have paid for essential costs. Provided that you keep up with the payments and terms, all interest and charges that would otherwise accrue against your debts will be frozen and you will be protected from your creditors taking legal action to recover what you owe.
With an administration order in place, you will only need to make a single regular repayment to the court, from which a 10% fee will be deducted with the remainder being distributed between all of the involved creditors. As the amount you repay will have been calculated after the court has examined your finances, it should provide an affordable and realistic route to repaying what you owe without the additional stress of enforcement action from creditors.
Once you have completed an administration order, all included debts will have been settled and your creditors will no longer be able to take action against you. If you can only afford to make very low repayments, a composition order can also be made which will determine how long you must make a regular payment for. Once this period (often of around 3 years) is complete, any remaining debt that was included in your administration order will be written off.
Who can get an administration order?
Administration orders are only available to debtors in England, Wales and Northern Ireland. To qualify, you must have:
- less than £5,000 debt in total; and
- received at least one court judgment involving an outstanding debt.
The way in which you apply varies depending on whether you in England and Wales, or Northern Ireland. In England and Wales, you will need to complete an N92 court form with details of your income, expenses and debts. In Northern Ireland, applicants must complete a ‘Form 11’ which can be provided by the Enforcement of Judgments Office (EJO).
The court may then ask you to attend a hearing where a judge will determine whether you are eligible, although in some cases they may make a decision without the need for a hearing.
Which debts are covered by an administration order?
There are no formal restrictions on the kinds of debts that can be included in an administration order, but in practice, a judge may decide to leave certain debts out. This is more likely to happen with debts arising from criminal fines or council tax arrears, but what can and can’t be included in an order will very much depend on your own circumstances.
It is also possible for a creditor to object to being included, and if this happens the court will call a hearing to decide whether it is fair, just and reasonable to leave a debt out of the order.
What are the advantages and disadvantages of an administration order?
Although administration orders made has fallen in recent years the number of as debtors instead turn to other solutions such as Debt Relief Orders, they remain an important option for those who are struggling to pay what they owe. All debt solutions come with their own advantages and disadvantages, which debtors should consider before making a decision that fits their situation.
We have summarised some of the key advantages and disadvantages in the table below.
|Making a single regular repayment to the court is often much more convenient than dealing with multiple different creditors.
|Administration orders have quite limiting eligibility criteria that many debtors will not be able to meet. These include the need to have multiple creditors, less than £5,000 of debt and at least one court judgment in their name.
|An administration order will protect against your creditors taking legal action to recover a debt. Your creditors will no longer be permitted to contact you, which can help to reduce the stress of struggling with debt.
|Given that the county court is involved from the outset of, the consequences of failing to keep up with repayments can be severe and include an ‘attachment of earnings’ order which could result in money being taken directly from your wages.
|By comparison to many other debt solutions, you will not usually be required to sell your home to satisfy your debt under an administration order.
|It can make it extremely difficult to access further credit as your details will be added to the Register of Judgments, Orders and Fines which is often reviewed by the credit reference agencies who update your credit file.
|It can help you to budget and manage your money, as your repayment amount will be calculated with affordability in mind.
|The court will deduct a 10% fee from each repayment made to cover the costs of administering the debt solution. Whilst this will not directly impact on your finances, it may result in a longer time period over which you need to make repayments.
What happens at the end of an administration order?
When you have paid off an administration order in full, you are entitled to request a ‘certificate of satisfaction’ from the county court to confirm that your debts have been settled. There is a £15 fee payable for this service.
The details will remain on the Register of Judgments, Orders and Fines for 6 years, however, your file should be marked to show that the debts have been satisfied. When you complete a composition order, you are still able to request a certificate of satisfaction, but any individual county-court judgments or other debts on your credit file will not be marked as satisfied as they will not have been paid in full.
Once it is complete, your creditors will not be able to take any further action against you and cannot commence legal proceedings – even if you paid a lesser amount than you originally owed through a composition order.
Frequently Asked Questions
How long does an administration order last?
An administration order will continue until all the relevant debts are paid off in full, unless the judge makes a composition order (for more information see below).
What is a composition order?
As the payments for an administration order are calculated according to what a court expects you to reasonably be able to afford, it may be that you end up only paying a very small amount to your creditors on a regular basis. This could result in it lasting for years if you were to settle the full debt and so in these situations the court might make a composition order – which limits the amount of your debt, and the period of time, that you have to pay.
One may be granted by the court automatically, but you can also apply if they do not do so. The court will look at how much you can reasonably afford to repay along with the total amount you owe before determining what percentage of the debt you should have to repay. Composition orders often set the length of an administration order over a 3 year period.
Are there any fees for an administration order?
There are no application fees, but if an order is made the court will take a 10 per cent fee directly from your ongoing repayment figure. This means that, if you were to pay £1,000 under your administration order, the court would deduct £100 with £900 going to your creditors.
Will an administration order affect my credit file?
An administration order will be flagged against your credit file for 6 years from the date of the order, and your name will be added to the publicly available Register of Judgments for the same period. This could limit your ability to access further credit during this period, as some creditors may be less willing to extend further money to you.
What happens if my circumstances change during an administration order?
If your circumstances do change during the course of an administration order, you can write to the court and ask to vary the payment or cancel the order altogether. This may require a hearing and ultimately will depend on your circumstances. Your creditors may also request a review of the order if they feel that your debts are not being settled in a satisfactory way.
If your circumstances change dramatically for the worse, you may wish to consider applying for a composition order which will limit the length of time for which you must cover payments.