An Administration Order is a formal legal remedy that is not often used because not many people meet the requirements. But if you do, then it is very likely to be the perfect solution for you!The legal requirements are:
- your total unsecured debts must be less than £5,000, and
- you have at least two debts, and
- you have at least one county court judgment (CCJ) or High Court judgment against you.
In an Administration Order, you make a single payment to the court once a month. The court deducts 10% for its fee and then divides the rest between your creditors. The big advantages of it are that interest is frozen on all your debts and your creditors cannot take any enforcement action – if they have already got a CCJ, you won’t be at any risk from bailiffs, if they haven’t yet got a CCJ they will not be able to apply for one. You can also apply for a Composition Order that will limit the time you make payments for, usually for three years.
How rare are they?
This graph shows the number of Administrations Orders made in England and Wales in each quarter from 2009-2014. (Because of the way the figures are recorded, it counts any AOs that have been suspended then restarted as ‘new’ AOs, so the actual number of new AOs each quarter is even smaller.)
As you can see the numbers have been dropping dramatically. The main reason for this is the £5,000 total debt amount has not been updated with inflation – now few people get a CCJ until their debt total is over the £5,000 limit.
The introduction of Debt Relief Orders has also probably contributed to the decline of AOs for people on low incomes because you don’t have to make any payments at all in a DRO.
Pros: no application charge, all hassle by creditors should cease, interest is frozen on your debts and you make one payment per month to the court.
Cons: none. By the time you have a CCJ your credit rating is already wrecked.
Debt Camel says Administration Orders are very rare, but if you meet the criteria go for it!
How to get an Administration Order
National DebtLine’s factsheet gives further details about Administration Orders and how to apply for one. You can use their helpline if you need advice on how to complete the application form.