In today’s challenging financial landscape, understanding how to navigate debt is crucial. ‘What is an administration order?’ This question resonates with many grappling with multiple debts. An administration order, a legal procedure in the UK, offers a structured and court-managed solution for debt consolidation.
Let us explain…
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What is an Administration Order (AO)?
An Administration Order (AO) is a legally binding debt solution approved by UK courts for individuals struggling with debt.
All of your debts are consolidated into a single, reasonable monthly payment that is made to the court, which then divides it up among your creditors.
Usually, the court may put a time limit on the order. This indicates that you don’t have to pay the whole debt in full. But note that there will be ongoing court admin costs that should be paid.
Need more help?
There are a number of alternative debt solutions available in the UK that you could use to write off some of your priority debts if you don’t believe an administration order is suitable for you. But keep in mind that choosing the right solution will aid you in writing off some of your debt, while choosing the wrong one will worsen your debt situation.
Here, the key is to determine what debt solution suits your personal financial situation in the best way possible. Fill out below online form to find a reliable solution to your debt issue using the help of our professional MoneyAdvisor team member.
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How does an administration order work?
An administration order ensures that you pay back your creditors by having you make payments to the court, which does the rest. Ten percent of any money you give them will go toward the court’s administrative expenses.
As long as the administration order is in effect, creditors cannot take additional legal action against you without the court’s approval.
You continue to pay until all debt has been settled, together with any associated court costs, and the order stays in effect. Unless an order for composition has been issued…
In some cases, the debtor will not be required to pay off all their debt. Instead, the court will issue a composition order. This puts a time limit in place on the administration order. A composition order is usually issued because the debtor is unable to clear the debts within a reasonable time period.
Typically, it lasts for a period of three years. After this period, any remaining debt is cancelled. So the debtor will not have to keep making monthly payments.
The amount you repay each month is determined by the court. Your monthly payment will be determined by them after they assess your monthly revenue. They’ll make sure there are no unfair deductions or financial hardships.
You pay the court when you make payments, and the court uses your money to pay each creditor. You are never required to make direct payments to the creditor. Your monthly wage will occasionally be deducted via an attachment of the earnings order.
The administration order is satisfied when the debtor pays off the entire amount owed, and this will be noted in the official register and your credit report.
You can request a certificate of satisfaction if you need proof that the administrative order was followed. If you ever want to apply for more credit, this certificate will be helpful.
You should inquire at the county court office in your area to obtain the certificate of satisfaction. This will incur a court cost, which is presently £15. If you need this certificate, reach out to them directly.
Note that after receiving an administration order for a joint debt, the other individual will still be chased for the money. But this is not the case if they also decide to get an administration order.
Also, the other person should be eligible on their own and will have to go through the application process separately. Getting advice from a debt charity on situations like these is wise.
Who Can Apply for an Administration Order?
Wondering if you’re eligible for an administration order?
The Must-Haves:
- A County Court Judgment (CCJ) against you for the debt.
- At least two outstanding debts.
- Total debts not exceeding £5,000.
If you don’t meet these conditions, an administration order isn’t an option for you. But don’t lose hope! There are other paths to financial recovery. Seeking free debt advice from a charity or exploring our debt solutions page could open new doors.
If the total amount of your debt is a little over £5,000, you might be able to get an administration order if you can work out a reduction with a creditor. Though it’s not a sure thing, it’s worth looking into.
The Process of Applying for an Administration Order
Embarking on the journey to apply for an administration order is like mapping out a path to financial stability.
Fill out form N92 and submit it to the county court in your area to request an administration order. The paperwork needs to be signed in front of a court officer only; you are not compelled to sign it. Completing the form is simpler if you complete your homework in advance.
Also, keep in mind to make a monthly budget and determine the precise amount of debt you currently owe. You can get more assistance on this from a charity that offers debt guidance.
What Debts Can Be Included in an Administration Order?
You can include any type of debt in an administration’s order. Thus, make sure to include all debt you owe when making an application. A creditor has the right to object to being included in the order, but the lasting decision is up to the district judge. It is also best to ask for mortgage and rent arrears to be excluded from an AO.
How Long Does It Take to Get an Administration Order?
It usually takes around 4 to 6 weeks in order to obtain an administration order. This period is provided in order to review the application and to give creditors a chance to object. So, if there is an objection, note that it will take more time.
After it is set up, you and the creditors will receive a copy of it. It will also be recorded on the Register for Judgments, Orders and Fines. So, it will remain on the register for a period of six years.
Benefits of an Administration Order
Some of the main advantages of an AO include:
- Creditors cannot change their minds because it is legally binding.
- There is no upfront fee.
- The court gets to decide the amount you should pay, and it’s only what you can afford.
- You only have to make one monthly payment.
- It is usually capped at three years. This indicates that you might not have to repay the entire amount.
You may still need debt and money advice to work out if an AO is right for you. There may be more suitable solutions, such as an IVA, which can also write off some of your debt.
Drawbacks of an Administration Order
However, like any financial solution, an administration order comes with its set of disadvantages. Some of these include:
- It is not available to every debtor. In order to be eligible, you should have a debt below £5,001 and an existing CCJ. A CCJ stains your credit file for a period of six years.
- In a situation where you miss any payments, there will be serious consequences. They might even consider taking money directly from your wages.
- Borrowing money in the future will not be an easy task due to poor credit ratings.
- You will have to pay an ongoing fee of 10% of your payment. This means that it will take much longer in order to clear your debts.
Other Debt Solutions and Additional Advice
If you believe an administration order is not a suitable option for you, note that there are other debt solutions in the UK that you can consider. Some of these include:
However, note that while the right debt solution will help to write off debt, choosing the wrong one will be expensive and might even worsen your situation. So, reaching out to a debt charity for advice is wise.
Some debt charities you can reach out to include:
- National Debtline
- StepChange
- Citizens Advice
Alternatively, feel free to fill out our online form, and our MoneyAdvisor team will guide you.
Key Points
- An administration order is a legal debt management process in the UK for consolidating multiple debts into one monthly payment.
- The court acts as a mediator and manager of payments, taking a small fee for their services.
- It offers legal protection, preventing creditors from pursuing further action without court permission.
- Specific criteria, including a County Court Judgment and a total debt limit, must be met to apply.
- It transforms multiple debt payments into a single, manageable monthly payment to the court.
- Potential freezing of interest and additional charges on debts, making repayments more manageable.
- The court assesses financial situations to set up a realistic and affordable monthly payment.
- Involves a detailed financial assessment and possibly court hearings.
- The order lasts until all debts are paid but can be modified with a composition order in some cases.
- While helpful in the short term, it can affect future borrowing capabilities.
- Deals with individual debts, complicating situations with joint debts.
- Other debt solutions and professional advice are recommended for those who don’t qualify for an administration order.
