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 circ*mstances. 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.
Can some of the debt be written off?
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.
How is a composition order made?
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:
you can request one on the application form in the comment box in Part C of your application form
at a review of the administration order. A review can be asked for by you, the court or your creditors. It usually happens if you're struggling to make your administration order payments
court staff refer the administration order to a district judge to consider a composition order. The court staff will look through your application form and if they think you won't be able to repay your debts within a reasonable time, they'll refer the case to a district judge. A reasonable time is usually about three years.
The district judge will look at your circ*mstances and either:
propose an order for payment in full, over a longer period
propose a composition order and fix how much you will pay back
order that a hearing be fixed.
Who can get a composition order?
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.
Can the creditors object to a composition order?
Creditors can object to a composition order but the judge makes the final decision. If the creditors object, a hearing will be called.
If a hearing is 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:
if a composition order is not granted, the administration order would run for many years
guidance to court staff says that a 'reasonable' length of time for an administration order is generally considered to be three years
a composition order offers 'a light at the end of the tunnel' for you, and therefore encourages you to keep to your payments
income payments under bankruptcy last a maximum of three years, so why should an administration order which is a less drastic step go on longer.
How long will a composition order last for?
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.
Example of a composition order
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.
Next steps
At the court hearing
Applying for an administration order
Is an administration order right for you?
How an administration order is managed over time.
FAQs
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 circ*mstances.
How do I get some of my debt written off? ›
Which debt solutions write off debts?
- Bankruptcy: Writes off unsecured debts if you cannot repay them. Any assets like a house or car may be sold.
- Debt relief order (DRO): Writes off debts if you have a relatively low level of debt. Must also have few assets.
- Individual voluntary arrangement (IVA): A formal agreement.
As with most types of debt solutions, any application for an administration order will appear on your credit file and affect your credit score. The administration order will appear on the Register of Judgements, Orders and Fines for six years and will have a negative impact on your credit score during this time.
What are the conditions for writing off bad debt? ›
When Should Businesses Consider Writing Off Bad Debts?
- The debt has remained unpaid for more than 90 days.
- The debtor has shown no willingness to establish a payment plan.
- The debtor has filed for bankruptcy.
- The cost of pursuing further action to collect the debt exceeds the debt itself.
I am therefore asking you to consider writing off my debt as I can see no way of ever repaying it. If you are unable to agree to this, please explain your reasons. Thank you for your help and I look forward to hearing from you.
How to negotiate debt settlement on your own? ›
Steps to negotiate your debt
- Determine that debt settlement is right for you. Firstly, verify the debt is actually correct. ...
- Plan and practice your negotiations. Before you attempt a debt settlement, you need to know what you're asking for. ...
- Persistently contact your creditors. ...
- Get your deal in writing.
Write-off of a debt is an accounting action that results in reporting the debt/receivable as having no value on the agency's financial and management reports. The agency does not need DOJ approval to write-off a debt since the agency is only adjusting its accounting records.
What is the advantage of an administrative order? ›
Benefits of an administration order are: it is legally binding. This means all creditors included in the order have to stick to it - they can only chase you if they get permission from the court. there is no up front fee.
What is the process of an administration order? ›
An Administration Order is a formal, legally binding agreement made between you and your creditors that is approved by the court. You will make one affordable monthly payment to the court, who will then distribute this to your creditors. It will stop your creditors taking further action against you.
What is the purpose of the administrative order? ›
An administrative order is a legal document issued by an administrative agency such as the Environmental Protection Agency (EPA) directing an individual, business, or other entity to take corrective action or refrain from an activity.
No one is free to ignore debts
If you look hard enough online, you'll find plenty of kooky websites claiming that you can write off some or all of your debts for free, but unfortunately no amount of wishful thinking or nonsense claims based on ancient legal documents can help you avoid repaying what you owe.
How long does it take to write-off bad debt? ›
The general rule is to write off a bad debt when you're unable to connect with your client. You should also write it off if they haven't shown any willingness to set up a payment plan, or the debt has been unpaid for more than 90 days.
How long does it take for bad debt to be written off? ›
How Long Does a Credit Card Company Usually Wait Before Writing Off a Debt? Typically, a credit card company will write off a debt when it considers it uncollectable. In most cases, this happens after you have not made any payments for at least six months.
What is a drop dead letter? ›
Send a 'drop dead' letter
You have the right to ask them to stop contacting you. To do so, you can send what's sometimes referred to as a “drop dead letter” — a written notice to the debt collector informing them you want no further contact. By law, debt collectors are required to follow this request.
Can I get my debt forgiven? ›
Debt settlement programs and bankruptcy both have the potential to result in forgiven debt, but they're also likely to have a significant impact on your credit score and your ability to borrow.
Can I write off a personal bad debt? ›
But they also apply to bad debts on personal loans you made. As of the 2021 tax year, the law on short-term capital losses states: You can use uncollectible accounts to subtract from capital gains, and any extra can be written off your taxable income by up to $3,000.
Can you ask a creditor to write-off debt? ›
Asking a creditor to write off your debts is successful in some cases and not in others. It is not right for everyone. It is important to speak to a qualified debt adviser about your circ*mstances and all your options.
Can written off debt be removed from credit report? ›
What you can do is contact your original creditor. You can ask them—very politely—what it would take in order to have the charge-off removed. At the very least, they'll likely ask you to pay back at least a portion of what you owe. In this situation, some creditors may offer a “Pay for Delete” agreement.
Do I have to pay a debt that was written off? ›
This process is referred to as a credit card debt "write-off" (also called a credit card "charge-off"). Writing off a debt allows a credit card company to report it as a loss and reduce its tax liability. But it does not eliminate your obligation to pay the debt.
Is there a way to get debt forgiven? ›
Debt forgiveness can happen in various ways, such as negotiated settlements, repayment plans or government programs. The goal is to help people manage their debts and financial stability.
