Administration Orders Explained
If you’re struggling from serious debt issues, an administration order could help you to avoid bankruptcy. An administration order is a debt management solution which allows you to pay off your debt in smaller, more manageable monthly instalments. By taking out an administration order and avoiding bankruptcy, you could save money, and potentially protect your assets. If you live in Scotland, then an Administration Order will not be available to you. However, trust deeds work similarly.
In this guide:
- What is an Administration Order?
- Would I qualify for an Administration Order, and is it right for me?
- How long would an Administration Order last?
- Are all debts included in an Administration Order?
- Will an Administration Order affect my credit rating?
- What other impacts would an Administration Order have on my life?
What is an Administration Order?
An Administration Order is a legally binding agreement that lets you pay only what you can afford of your debt each month. The amount that you pay is determined by factors such as your essential spends (like rent), general living costs, and which debts are a priority to pay. As long as you keep up with the court-ordered payments, all interest on your debt is frozen and your creditors will be legally unable to take further enforcement action against you.
The court usually takes a 10% administration fee from your monthly payments, so 90% goes to your creditors. Your money is then distributed amongst your creditors, according to what percentage of your total debt is owed to them. For example, if you are paying £100 a month and have £4,000 in debt, if one creditor is owed £2,000, they will receive £50 a month.
Would I qualify for an Administration Order, and is it right for me?
To be able to get an Administration Order, you need to meet all of the following criteria:
- You can prove that you are unable to meet your contracted monthly repayments after essential expenditures.
- You have at least one County Court or High Court judgment against you.
- The total debts to be listed in the Administration Order must be less than £5,000.
- You owe money to two or more creditors.
An administration order could be the right debt management solution for you if:
- You have a regular income with a bit spare each month (so you’ll be able to pay a bit monthly).
- You don’t want to deal with your creditors directly by yourself.
How long would an Administration Order last?
Your Administration Order would last for as long as it takes to repay the debt in full. This varies depending on the size of your debt, and how much the court has decided you can afford to pay monthly. If the judge believes that your payments aren’t big enough for the debt to be paid off quickly enough, they can instead make a Composition Order, where you’ll only be asked to repay part of your debt.
Are all debts included in an Administration Order?
Legislation doesn’t make clear which debts can and can’t be included, so different courts have different practises over whether they include secure debts, fines and priority debts. So, if you’re considering an Administration Order, it may be worth consulting your local county court for advice.
Will an Administration Order affect my credit rating?
Your Administration Order would be listed on the Register of Judgements, Orders, and Fines. This is available to the public via Trustonline, though a fee of £4 is charged to search this section of the register.
If an Administration Order helps you enough with your debt management that you pay off your debts in full, you can request the court marks your entry as “satisfied”, and give you a ‘certificate of satisfaction’, which will cost you £15.
However, the details of your Administration Order will be visible on your credit history file for six years. This might make it more difficult for you to open a current account, and you may be refused credit.
What other impacts would an Administration Order have on my life?
- Cost: Though there is the small cost of the admin fee (10%), as it’s taken from your monthly payments you don’t need to pay it upfront. This is also a lot cheaper than bankruptcy.
- Employment: Most jobs aren’t impacted by an Administration Order. However, you might be disqualified from holding certain posts, such as school governor. You should check the T’s and C/s of your contract to double check if there are restrictions.
- Home: You won’t be expected to sell or remortgage your house to pay your administration order. However, some courts won’t grant an administration order to you if you’re a homeowner or have a mortgage.
- Possessions and savings: If you have any valuable assets, like a car, you might be expected to sell them to help pay off some of your debt. They might also ask you to use some of your savings.
- Pension: Your personal and state pensions won’t be affected by an administration order.