What is an administration order?
If you’ve been looking into debt solutions, you might have come across administration orders. But what exactly are they and how do they work?
Here at Lowell, one of our top priorities is helping our customers understand financial terminology better which is why we’ve created this guide covering all the basics of administration orders.
This content is intended to be an impartial guide on administration orders and how they work. Lowell Financial Ltd is not endorsing administration orders; as every circumstance is different and a solution that is right for one person may not be suitable for another.
What is an administration order?
An administration order is a formal debt solution arranged by the County Court. It’s a legally binding agreement between you and your creditors, the people you owe money to, which means they can no longer contact you for payment or add any additional charges or interest to your debts.
Instead, a new form of payment plan is put in place where you make one monthly payment to the court every month and the court staff share this money between your creditors.
Administration orders are only open to those in England, Wales, and Northern Ireland. If you’re in Scotland and struggling with your debt, StepChange can help provide advice on your options.
If you’re interested in finding out more information on other debt solutions, you can read our guide on the different types of debt solutions.
How do administration orders work?
To be able to apply for an administration order, there are some requirements:
• Have less than a total of £5,000 in debt
• Have at least two different debts
• Received at least one county court judgment (CCJ) or High Court judgment against you
For anyone living in England and Wales, you’ll be required to complete an N92 court form which includes information on your income, expenses, and debts. This form will need to be submitted at your local County Court hearing centre.
In Northern Ireland, it’s a different process where you’ll need to get a ‘Form 11’ by contacting the Enforcement of Judgments Office (EJO) which is an administration order application form. Once you’ve completed it, you’ll need to return it to the EJO.
There are various organisations such as StepChange and National Debtline that can offer you free guidance as to whether an administration order is right for you and your situation.
Do administration orders include all debts?
Technically, any debt you have can be included in an administration order. However, a Judge may choose to leave out some of your debts such as council tax arrears or criminal fines.
Additionally, if a creditor doesn’t want their debt to be included in the order, then they can object. Doing so will result in a court hearing to decide whether the debt should be left in the order or not.
Are debts frozen during an administration order?
No, debts included in your administration order are not frozen. You’re still expected to make payments towards these debts but instead of going to various creditors this will just be paid as one amount to the court.
Whilst your debts aren’t frozen, any interest or other charges associated are frozen. You’ll also be protected from the creditors included in the administration order taking any further enforcement action including court or bailiff action.
Are debts written off after an administration order?
Your debts won’t automatically be written off after an administration order is completed as it is a form of payment plan therefore your outstanding debts will be paid off in full (those that are included) once the order ends. However, you can try to apply for some of your debt to be written off through a composition order.
What happens if my administration order application is turned down?
If you’re not successful when applying for an administration order, you may be able to appeal the decision or start a new application. A court can turn down your application if they don’t feel as though your reason is strong enough and that another debt solution may be more appropriate. Organisations such as National Debtline or a local solicitor can offer you advice and guidance on the next steps if your application has been turned down.
How long does an administration order last?
Most of the time, an administration order lasts as long as it takes for you to pay off all the debts included in full. However, there are situations where this may not be the case.
For example, if you’re granted a composition order by a judge or if your circumstances change then you can ask for the original terms of the order to be changed. It’s also possible that creditors may ask for your payments to be reviewed again.
What happens if I cannot comply with an administration order?
A court officer would send you a notice setting out the amounts outstanding. This will give you the options of bringing your payments up to date or to request that the administration order is varied. It is important that you respond within 14 days. If you do not, the court officer may revoke the administration order or apply an alternative sanction.
What is a composition order?
A composition order may be granted by the court if you aren’t able to pay the debt in full within a reasonable time. This gives you a time limit, usually 3 years, to continue making payments and means you’ll only pay back part of the total debt, and the rest is written off.
One reason why you might not be able to pay off your debts in full within a reasonable time is if the amount you’re ordered to pay back each month is very small. You can read National Debtline’s guide on administration orders for information on asking for a composition order.
Can an administration order affect my credit file?
Having an administration order can affect your credit file and may make future borrowing more difficult. This is because it will appear on your credit reference file once entered on the Register of Judgements, Order and Fines and therefore may impact your credit rating.
After six years, the administration order will be removed from your credit reference file and changed on the Register to reflect that you’ve paid the debts. Once removed, it won’t affect your credit rating.
What are the advantages of an administration order?
• You only have to make one monthly payment to the court which then deals with your creditors individually.
• Any interest and other additional charges will be frozen, and your creditors can’t chase you.
• All your debts included in the administration order are dealt with at once.
• In some cases, you can get some of your debt written off.
• An administration order is legally binding which means all your creditors have to stick to the terms.
• There is no upfront fee that needs to be paid immediately to the court. Instead, a 10% handling fee will be taken from each monthly payment.
What are the disadvantages of an administration order?
• Some courts may not grant an administration order to homeowners or people with a mortgage.
• If you’re struggling, you may be expected to sell large items such as cars in order to pay off the debt.
• Like most debt solutions, an administration order can have an impact on your credit score and future lending.
• Arranging a repayment plan directly with companies may cost you less, as creditors such as us do not charge any handling fees for arranging installment plans.
What happens at the end of an administration order?
Once you’ve paid off the administration order in full, you’re able to contact the county court and ask for a ‘certificate of satisfaction’ which currently costs £14 (September 2023).
Basically, it serves as proof to future creditors that you’ve made the necessary payments towards your debt and no longer need to pay any money towards this administration order. This can be especially useful if your credit file hasn’t yet updated to show your debt as being paid off or ‘satisfied’.
As we mentioned, even after your administration order has ended, it will still appear on the Register of Judgments, Orders and Fines and credit file for 6 years after it was first entered. However, this will be amended by the court to reflect the fact that it has been paid off.
Lowell can help you seek debt advice
At Lowell, we want to support our customers in any way we can. This even means putting you in contact with other organisations that can offer debt advice and support that we can’t.
If you’d like to speak with us about your payment plan, please do get in touch with our friendly team whichever way works best for you. Alternatively, if you prefer to handle things yourself, you can manage your account via our mobile app.
We know how important it is to have a team that genuinely wants to help our customers find the right option and become debt-free with Lowell. For more information on debt-related topics and how Lowell works together with our customers, check out our Debt Guidance Hub.
· First published: 29th September, 2023