Financial Resource

Debt is a big problem in the UK. The TV channels are flooded with advertisements for debt consolidation loans and companies offering to manage your debts for you, but what if you don’t want to, or can’t, do this?

It may be that a more extreme form of debt management is needed in your situation. Bankruptcy is of course the harshest of these, but as there’s a stigma attached to going bankrupt – even in a game of Monopoly it’s embarrassing – most people would prefer to do almost anything else than go down this road.

The options available to you will largely depend on your level of debt. For debts of over £15,000, a debt management company might indeed be your best answer. They very rarely deal with debts under this amount.

If, on the other hand, your debts total no more than £5000, you may want to consider applying for an Administration Order. This is a form of debt management made through the Courts, and to be eligible you need to owe money to at least 2 creditors, owe no more than £5000, and at least one of your debts needs to be a County Court Judgement.

The Court will arrange with you the monthly amount you can reasonably afford, and distribute your payments to all your creditors on a pro-rata basis – meaning the higher debts get the larger portion of payment. The court also takes 10% of each payment as its administration costs.

As a means of debt management, an Administration Order is more preferable to an IVA or bankruptcy, both of which can have extreme adverse effects on both your self-esteem and credit rating. Filing an Admin Order will prevent the benefiting creditors from taking any further action against you, and all phone calls and payment demands should stop. In most cases the interest will also stop accumulating, thus reducing the amount of debt. This isn’t a short-term solution, you must keep paying the courts until your whole debt is paid off, but it will give you a break from creditors and allow you to just make one affordable payment per month.

To file an Administration order, you need to contact your local court office or go to their website and fill in form N92.

Tags: debt, Management, web