If you apply for an administration order, you may be able to have some of your debt written off. This is called a composition order. You can ask the judge for a composition order or the judge may decide to give you one after looking at your financial circumstances. You can usually only get one if you won't be able to pay all your debt off in a reasonable time.
This page tells you about composition orders and how they work.
As part of an administration order a judge can order that you only pay a proportion of your debts. This is known as a composition order. A composition order should be considered where you can't pay off all your debts within a ‘reasonable time’. Guidance to courts suggests that a reasonable time will usually be three years. The rest of the debt will be written off.
A district judge can order you to pay only a proportion of your debts. They should consider this if you can't clear your debts within a reasonable time. A reasonable time will usually be about three years. There a several ways that a composition order can be considered:
The district judge will look at your circumstances and either:
Getting a composition order depends on your ability to pay your debts, but you are more likely to get a composition order if you are sick, disabled, elderly, or a single parent and don't own your own home. Some district judges may be reluctant to give you a composition order if your application includes a debt such as a magistrates court fine or child support arrears as it may be arguable that these ought to be paid in full. It will be up to the district judge to decide.
Creditors can object to a composition order but the judge makes the final decision. If the creditors object, a hearing will be called.
You'll be given 14 days notice of the date of any hearing. You must attend. The hearing gives you and the creditors a chance to argue your case.
When arguing for a composition order at the hearing, it may be useful to point out to the district judge that:
The judge will decide how long the composition order will last for. During that time, you will pay the court an amount of money each month to pay your debts. When that time has passed, the composition order has finished and you won't have to pay the rest of the debt.
Provided that you make all the payments required by the administration order once it has finished you will be discharged from all the debts in it including any debts under a judgment.
Ms. X has £4,000 total debt. She can afford a monthly repayment of £20 per month and feels that the administration order should continue for three years only. Otherwise, the order would be too onerous. £20 per month over three years amounts to a total repayment of £720.
The court will deduct £72 (10%) to cover it’s costs. So the total amount to be repaid will be £648. As a proportion of the total debt this is 16% (£648 x 100 divided by £4000 = 16%.) This means Ms. X would be paying back 16 pence within every pound she owed.
Ms. X could therefore write on part C of the application form that she is able to offer £20 per month, and would like to apply for a composition order of 16p in the pound.
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