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Rent and mortgage arrears - administration orders
An administration order (AO) is a formal and legally-binding agreement between you and your creditors to pay back your debts over a period of time.
One of the main principles of administration orders is that all of your debts should be dealt with together. However, if you have rent or mortgage arrears, it may be best to ask for these to be left out of the AO.
This page tells you what to do if you have mortgage or rent arrears and are considering an administration order.
Asking the court to leave rent or mortgage arrears out of the AO
One of the main principles of administration orders is that all of your debts should be dealt with together. When you apply for an administration order, you must list all your debts on the application form. However, you can ask the court to leave a particular debt out of the AO if you have a good reason. Any creditor can also object to being included in the AO but it is up to the district judge to decide if any debts are left out. A debt that you want to exclude from the order will still count towards the £5,000 total.
You can include your rent arrears in an administration order but this doesn't stop a landlord from getting possession of the property.
If you have a private landlord, you should make an arrangement to pay the rent arrears before you apply and ask the court to exclude the rent arrears from the AO. This is because, even if the rent arrears are included in an AO, a landlord may still be able to gain possession of the property. They are less likely to do this if you have a direct arrangement with them to pay off the debt. You can include your rent arrears repayments under essential expenditure on the AO application form.
Some social landlords, such as a local authority or housing association, might be happy for the rent arrears to be included in the AO. They will be happy that you are dealing with your debts and the landlord will be paid by the court. However, if these rent arrears are included, the court is less likely to consider a composition order (where some of the debt is written off).
If you want to ask for a composition order:
- come to an arrangement with your landlord to pay off the rent arrears separately
- include your rent arrears repayments under essential expenditure on the AO application form
- put a note on the application form asking for the rent arrears to be excluded from the AO.
What are 'arrears'?
Arrears are payments you are behind on.
For example, if you had a mortgage worth £70,000, you would be £70,000 in debt. However, you would pay this back with monthly instalments, say £500. If you missed one or more of your monthly payments, those missed payments would become arrears. If you missed two payments you would have mortgage arrears of £1,000.
What happens with mortgage arrears depends on the practice in your local court. Some courts say that the total amount outstanding under the mortgage counts as a debt, not just the arrears. In this case your debts are likely to be over the £5,000 limit and you won't be able to have an AO at all. Your local Citizens Advice Bureau may be able to tell you what happens in your local court.
In all cases, you must list your mortgage arrears on the AO application form. But it is common practice for the court to leave this debt out of the AO. It is better to:
- agree a separate plan with your mortgage provider to pay off the mortgage arrears before you apply for an administration order
- include the mortgage arrears repayments under expenditure on the application form
- put a note on the form, asking the court to exclude the mortgage arrears from the AO.