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Advantage Quick Guide to: Administration Orders

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An individual who has debts that do not exceed £5,000, cannot pay these debts in full now but will be able to over time, can apply to a court for an administration order. An administration order offers protection to the individual concerned and enables them to make payments of their debts by monthly instalments. An administration order also allows for a postponement of payments (a ‘moratorium’) on the enforcement of the debts by the individual’s creditors. The main benefit of this type of order is that while the order remains in force, and the debtor maintains the agreed monthly payments, no creditor may issue proceedings for (or exercise any other remedy in respect of) any of the debts covered by the order.

In order for an individual to apply for an administration order, certain conditions have to be met. These include the individual’s debts not to exceed £5,000, and that the court will not approve an order if the debts cannot be paid off in a ‘reasonable’ period of time – typically within three years. All the individual’s debts will be considered in an administration order, including secured debts which are not expressly excluded from section 112 of the County Courts Act 1984, which provides that the debtors ‘whole indebtedness’ must not exceed £5,000. This means that a debtor with a mortgage debt will rarely be able to obtain an administration order as their whole indebtedness is highly likely to exceed the £5,000 limit.

Costs of obtaining an administration order

An administration order will allow an individual debtor to pay a fixed sum each month into the court. The court will administer the payments and divides the payment equally amongst the creditors. The court will also retain 10 per cent of the monthly payment to cover its management costs. Apart from this deduction, there are no additional cost or court fees for the debtor to pay - the total the debtor will pay is the whole of its liability to his creditors plus a further 10 per cent. Once all creditors and the courts 10 per cent costs have been paid in full the administration order is discharged.

Applying for an administration order is relatively straightforward. The debtor who is applying must complete form N92 and lodge it with the court for assessment. The application form requires the debtor to give full details of financial circumstances, including:

• Income & Assets
• Outgoings and liabilities, including full details of every debt
• Full details of employment
• Dependants & Property

The debtor may make an offer of payment but can leave it to the court to determine the level of monthly payments. The N92 application form must be sworn or affirmed before an officer of the court, and the debtor should complete the form and then take it to their local county court together with a copy of the outstanding judgment(s). The declaration in the application form is then sworn and the court will then retain the application for determination.

Once this is completed, the court will then decide whether or not to make an administration order. The court will also set the amount of each monthly payment and then send notice of its intention to make this order to all the creditors, who then have 16 days to object to the making of the order or to the value of the monthly payments. If no objections are made, the administration order will be made, served on all interested parties and registered in the Registry of Judgments, Fines and Orders.

The debtor then makes the monthly payments until the full debts are paid together with the court’s costs. In some cases, the court may order that the monthly payments are deducted at source from the debtor’s salary. A debtor has the right to object to this and may agree to that element of the order being suspended provided the debtor makes the monthly payments voluntarily.

If a creditor does object within the 16 days, or if the court cannot determine the amount of monthly payments or is not satisfied with the information contained in the application notice, it will list the matter for a hearing.A creditor can also seek to be excluded from the administration order. If they do, the matter will be considered by the court who may agree to exclude the creditor from the arrangement but will prevent the creditor from taking legal or enforcement action to recover its debt without prior permission of the court.If the debtor defaults on payments the debts the court can instruct the bailiff to levy execution against goods; make an attachment of earnings order or can revoke the administration order, entitling creditors to take their own action to recover the debts.At the end of the administration order, for a fee of £15 the debtor can ask the court for a ‘certificate of satisfaction’.

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