Last week I posted the first in a series of five possible solutions for tackling crippling debt. If you’re having debt problems, read that post too. In this post, I will show you another possible solution for getting debt under control; Administration Orders. I’ll explain what they are, what criteria you’d need to meet to get one; and what to expect if you’re granted one.
What Is an Administration Order?
An Administration Order is something the County Court grants, to give you a way of handling debts you’re having trouble repaying.
An Administration Order is legally binding. Once it’s set up, your creditors (people you owe money to) won’t be able:
– to contact you or take any further action against you (unless the court gives them permission).
– to add any more interest or charges to your debt.
The Order involves your debts being dealt with as one. Instead of you paying your creditors, you’ll pay the court a single monthly payment; which they’ll then split between your creditors.
How Do I Get an Administration Order?
For the court to consider you for an Administration Order you need to say yes to the following questions:
– Do you live in England, Wales, or Northern Ireland? Administration Orders aren’t available in Scotland.
– Do you hold debts with at least two creditors?
– Has at least one of your debts involved a County Court or High Court judgment being made against you?
– Is the total of your debts, including the interest and charges under £5,000?
– Can you show you’re able to make regular payments?
If you said ‘yes’ to the questions above, then you have to fill out an N92 form (which you can view and download from here) and send it to your local court. On the form, you must give details such as your income, your outgoings, a list of your creditors; and how much your debts are.
What Happens Next?
Once the court receives your N92 form, they’ll review it and decide whether they’ll grant you an Administration Order. A court hearing might be necessary. They must look at things such as how much you can afford after paying for your basic living costs.
Depending on whether the court grants you an Administration Order, you’ll get told:
– if every one of your creditors is included in the Order (certain creditors might ask that they’re left out. If this happens, the judge might order a court hearing to decide. Sometimes council tax arrears and criminal fines get left off the Order too).
– whether you must pay all or only part of the debts listed in the Order.
-how much you must pay the court every month (it can sometimes be as little as £1 per debt).
– how long the Administration Order will last.
Will It Cost Me to Set up an Administration Order?
It won’t cost you to set up an Administration Order, but for every payment, you make to the court, 10% gets deducted as a court fee. However, the total fee across the whole Administration Order isn’t allowed to be over 10% of your debt. So, for example, if you owe £4000, the court can’t take any more than £400 in court payment fees.
Can I Cancel an Administration Order?
You can ask to cancel your Administration Order or to change your monthly payments, by writing to the court. You might have to attend a court hearing.
A Composition Order sets a date for when your Administration Order will end. This is usually after three years. When you get to this date, your creditors cancel any debt you still have with them.
The court might consider a Composition Order if:
– you can only afford to repay a small sum towards your debt each month.
– your payments won’t settle your debts within a reasonable time.
If a Composition Order isn’t granted by the court, then your Administration Order will run until you’ve repaid your debts.
What Happens If I Don’t Keep up with My Administration Order Payments?
If you don’t make your regular payments, then the court could:
– cancel your Administration Order.
– order an ‘Attachment of Earnings Order’.
An Attachment of Earnings Order is a demand the court makes of your employer, to take money out of your wages to repay your debts. If this happens, your employer could take a £1 administration charge each time they do the pay deduction. The court sets a ‘protected earnings rate’ for you. This means you’re guaranteed a set amount of pay before any money’s taken out by your employer.
Attachment of Earnings Orders only apply to residents of England and Wales and don’t apply if your debt is under £50 or if you’re:
– in the Armed Forces,
– in the Merchant Navy
Other Considerations Before Applying for an Administration Order
– when your Administration Order starts, it’s recorded on the Register of Judgments, Orders and Fines. It’s usually taken off after six years.
– your Administration Order will be on your credit file for six years too.
– during the time that a record of your Administration Order remains in these two places, you’ll find it harder to get more credit.
– if you pay your debts in full, your record gets marked as ‘satisfied’.
– if you want to, you can pay the court £15 to get a ‘certificate of satisfaction’.
While researching Administration Orders, I discovered that they’re not often used anymore. I found that Debt Relief Orders are often more suitable and affordable. I’ll explain Debt Relief Orders in part four. If you want to research them now, have a look at this.
I hope you’ve found this information helpful. Is an Administration Order something you would consider? Do you think they’re a good solution for tackling crippling debt? What do you think is the best way of dealing with debt? Or are you living a debt-free life? Was it always that way? If you know of anyone who could benefit from reading this post or any of the parts in this series, then please feel free to share the post with them.