What is a Composition Order?
A Composition Order will usually be considered by the judge overseeing your Administration Order application if your proposed payments are so small that it will take many years to pay back your debt in full.
In these circumstances, you will be asked to pay what you can afford each month, typically for a period of three years. If a Composition Order is granted then you will only end up paying back a proportion of the debt that you owe.
For example, If your debts total £4,000.00 and you can only afford to pay £25.00 per month it would take you almost 15 years to repay your debts in full. If a Composition Order was granted, you would only need to pay £900 over three years rather than the full £4,000. The court will deduct 10% from your monthly payment (£2.50) as an administration fee, which means £22.50 is given to your creditors. This means that your creditors will have received just over 20% (£810 / £4,000) of the original amount owed at the end of the 3 years.
Debt Advice Foundation is a registered UK charity offering free, confidential support and advice on any aspect of debt, including Administration Orders. If you need to talk to someone about Administration Orders or would like general debt advice, please call 0800 043 40 50 to speak to an adviser.