If you are having serious debt management problems
then you can use a specific type of legal ‘order’ that is approved by a court to help you manage your debts. This kind of order -- usually known as an Administration Order -- allows you to pay one single payment to the court every month which they then divide out to your creditors. The payment you make here will not be divided between your creditors by number or equally -- it will be made on a pro rata basis based on how much you owe to each creditor.
This kind of debt management
can help a lot of people sort out their debts. They are given the protection of the legal system and no longer have to deal with their creditors on their own. In return they commit to repaying what they can afford every month until all of their debts are repaid. This can be a good solution for a lot of consumers.
Sometimes, however, it may be recommended that you take on a different kind of route. This is known as a Composition Order. Composition Orders work in much the same way as Administration Orders but may suit some people in specific circumstances better. Whether you will qualify for/be allowed to opt for a Composition Order will be up to the court that handles your case.
So, how are Composition Orders different from Administration Orders? The main difference is to be found in how much you end up paying back. An Administration Order will usually be set up to carry on until all of your debts are repaid in full, within a reasonable amount of time. A Composition Order, however, will only be set up to repay a percentage of what you owe and your remaining debts will then be written off.
Not everyone will be allowed to take up the option of a Composition Order, however. These variations of Administration Orders tend to be given to people who have specific circumstances. So, for example, to qualify you will:
- Probably find it hard to pay off all of your debts in a reasonable period of time.
- Probably have a relatively low income.
- Fall into a specific category (i.e. you will be unfit to work through illness, or will be elderly, disabled, a lone parent or unemployed).
Composition Orders are granted by District Judges who will review your case to see if this is the better solution for you. In many cases people are directed to start off with an Administration Order for a period of time. When this order comes up for review then the judge may well then allow them to repay their debts via a Composition Order instead.
If you are going down the route of taking out an Administration Order then it might be worth asking about whether the court would consider allowing you to have a Composition Order instead. As mentioned, you may not be given this immediately but, if your debts are so bad that you cannot pay them off quickly and you are in severe financial trouble then this might be a route open for you to take that could see you debt free a lot quicker.