What is an administration order?
An administration order can be made by the county court in England & Wales or by the Enforcement of Judgments Office (EJO) in Northern Ireland if the debtor has 2 or more outstanding debts totalling not more than £5,000, one of which being a judgment debt. It lets the debtor pay a specified regular amount into court or EJO for distribution amongst all their creditors on a pro-rata basis.
While the administration order is in place, it stops those creditors listed in the schedule to it from taking further action against the debtor.
An administration order will negatively affect the debtor's credit rating and could make it harder for them to open bank accounts or obtain loans.
In England and Wales, the administration order will remain in place until all the scheduled debt is paid, unless a composition order is made. A composition order allows the debtor to pay off less than the total amount of the scheduled debts. This order is appropriate where the debtor will not be able to pay off all their scheduled debts within a period of 3 years.
In Northern Ireland the EJO may decide in the administration order that the debtor does not need to repay the full amount of debt if they think that is just.
Benefits of an administration order
An administration order gives the debtor the following benefits:
- There is no fee payable when applying to court or EJO for the order. The court recovers its costs from the money paid into court by the debtor at the rate of 10p in each pound. The total costs can't be more than 10% of the total debt.
- The amount and frequency of the payments into court or EJO will be set at an affordable level.
- The court or EJO will make pro-rata distributions to the scheduled creditors and deal with them so that the debtor no longer needs to.
- The scheduled creditors can't enforce their debt or apply for the bankruptcy of the debtor without the court's or EJO's permission.
Who can apply?
Any debtor with total debts of less than £5,000 can apply for an administration order. The debtor must have at least 2 creditors and one of the debts must be a county court or High Court judgment. The debtor must be unable to pay the debt immediately in full but must show that they can afford to make regular repayments.
How does the debtor apply?
England and Wales
The debtor applies by first completing an 'Application for an Administration Order'. In this form the debtor will give information about all their creditors and the amounts owed to them, details of the judgment debt and details of their total income and expenditure.
In Part C of Form N92 the debtor can ask for a composition order, although the final decision will rest with the court. A composition order is where the court orders that the debtor only needs to repay part of the debts. The court would make this order if it is clear from the debtor's financial circumstances that they will not be able to pay off the debts in full by making regular payments over a reasonable period of about 3 years.
The debtor must verify the truth of the information supplied in Form N92. This is done by either swearing on oath or by affirmation when they sign it in front of a court officer at their local County Court. Documentary evidence of the information given in the form must be included.
The debtor will apply directly to the. You must be able to show to the EJO that you are unable to pay your debts that are under £5,000 and one of which must be a court judgment. The application is made in form 11 (this can be obtained from the EJO) which the debtor must complete fully to detail their debts, creditors, income and outgoings.
After the application
What happens after application is made to court?
England and Wales
The court officer will decide whether an administration order should be made based on the information supplied in the application form.
If the debtor meets the requirements for an administration order and has the means to pay off the debts in 3 years, the court officer will put an administration order in place. The court officer will calculate the amount and frequency of the regular payments the debtor must make into court. The court officer will send a notice with the details of the proposed order, to the debtor and each of the scheduled creditors.
The details in the notice include:
- the list of debts included in the proposed administration order;
- the frequency and amount of the debtor's proposed payments into court; and
- a copy of the debtor's application.
The debtor and any of the creditors may object to the proposed order within 14 days from receiving the notice. They debtor may object if the required payments into court seem too high. The creditors may object to:
- the making of an administration order;
- the proposed rate of re-payment; or
- the inclusion of a particular debt in the order.
If there are no objections within the time allowed, the court officer will make the administration order as proposed. If there are any objections they will fix a date for a court hearing. The court officer will give the debtor and all creditors at least 14 days' notice of the date of hearing.
If the court officer finds that the debtor's income is not enough to fix a rate of payment that will allow repayment of the debts within a reasonable time, they will refer the application to the court. The court will either fix the rate of payment to allow for repayment over a longer period, or will allow part payment in a composition order. If this is not possible, it will ask the court officer to fix a date for hearing of the administration application. The court officer will give the debtor and all creditors at least 14 days' notice of the date of hearing.
Once the application is received the EJO will appoint a day for hearing when your application will be considered. They will serve a Notice of Hearing on the debtor and each of the creditors not less than 8 days prior to the hearing. If any of the creditors wish to object to any of the listed debts being included in the order, then they must at least 4 days prior to the hearing, lodge with the EJO a Notice of Objection and send a copy to the debtor and the creditor they are objecting to.
The case will be heard by a High Court Master. The Master will decide if it is appropriate for an order to be made, and if so, whether they are including all the debts listed in the application. Sometimes they may ask further information to 'prove' a debt is true and accurate. At the hearing the Master can hear evidence from the debtor and any of the creditors. If the Master grants the order, then the EJO will send a copy to the debtor and each of the creditors. They will also send notice of the order having been made to any court where the debtor has a judgment or pending action in relation to one of the debts in the order.
After the order is made, any creditor that was not notified may raise an objection. If you failed to include a creditor in your original application, then they can seek inclusion via the EJO. The EJO will notify you if they receive any such requests. If you don't object, then they will be included in your list of creditors. If you do object, then the matter will be referred back to the Master for adjudication.
The debtor's responsibilities
England and Wales
Once the administration order is in place the debtor must keep up the regular payments into court. If they default, the court can make an attachment of earnings order (i.e. they will take the money directly from the debtor's employer prior to them paying the debtor's wages) or cancel the arrangement.
The debtor must comply with the terms of the order. The EJO may, if the debtor is employed, get an attachment of earnings order (i.e. they will take the money directly from the debtor's employer prior to them paying the debtor's wages).
The Chief Enforcement Officer is responsible for the conduct of the administration order. They can apply to the Master for the discharge of the order if the debtor doesn't comply with it. If a debtor is experiencing difficulties paying the instalments they should contact the EJO immediately. The Master has the power to suspend an order or reduce the instalments if they are in genuine difficulty in making payments.