Part 5: Debt Management and Relief Commentary on Sections: Part 5 Section 106: Administration orders
468.Subsection (1) of this section replaces the existing Part 6 of the County Court Act 1984 (“CCA 1984”).
Section 112A – Administration orders
469.Section 112A provides that an administration order (“AO”) is an order to which certain debts are scheduled, which imposes a requirement on the debtor and which imposes requirements on certain creditors. Debts are to be scheduled to the order in accordance with the provisions in sections 112C, 112D, 112Y(3) and 112Y(4). The requirement which must be imposed on the debtor is set out in section 112E and this is a requirement to make repayments towards scheduled debts whilst the AO is in force. The requirements which must be imposed on certain creditors are set out in sections 112F to 112I and these are all requirements which restrict the ability of those creditors to take enforcement action whilst an AO is in force.
Section 112B – Power to make order
470.This section sets out the conditions that must be met before the court can make an AO in relation to a debtor. This is a new test for making AOs which introduces the concept of “qualifying debts” together with other new requirements that must be met before an AO can be obtained. Section 112AB provides that a “qualifying debt” is any debt, except for a debt that is secured against an asset, such as a mortgage, or a debt that falls within a description specified in regulations. The conditions which must be met before an AO can be made are:
	the debtor must have at least two qualifying debts, and he must be unable to pay at least one of them;
	the debtor must not have any business debts;
	the debtor must not be excluded by the AO, voluntary arrangement or bankruptcy exclusions as defined by section 112AH;
	the debtor’s total qualifying debts must be less than the amount prescribed in regulations (“the prescribed maximum”);
	the debtor’s surplus income must be more than the amount prescribed in regulations (“the prescribed minimum”).
471.Section 112AE sets out how “surplus income” is to be calculated. It is to be calculated in accordance with regulations. Before making an AO, the court must have regard to any objections. The Civil Procedure Rules 1998 will govern the procedure for making the order.
Section 112C – Scheduling declared debts
472.Debtors will be required to declare all qualifying debts, including those which are not due at the time of applying for an order, to ensure that the court has a true picture of their indebtedness. This section provides that when making an AO, the court must schedule to the order all declared debts already due. Declared debts that become due after an AO is made must be scheduled to the order following an application by the debtor or creditor and after considering any objections made to the debt being scheduled (in accordance with section 112AG(5)).
Section 112D – Scheduling new debts
473.This section gives the court the power to schedule to an existing AO qualifying debts arising after an order is made and becoming due during the life of the order, on the application of the debtor or a qualifying creditor. A “qualifying creditor” is a creditor under a qualifying debt (see section 112AA(1)). However, this power is dependent on the total debt figure (including the new debt) not exceeding the prescribed maximum.
Section 112E – Repayment Requirement
474.This section imposes a requirement on the debtor to make repayments towards scheduled debts during the life of an AO. Debts may either be repaid in full or to the extent decided by the court and different debts may be repaid to different extents.
475.Subsection (5) provides the court with the option to order that repayments are not to be made on debts arising after an order is made and scheduled to the order under section 112D, until all of the repayments required in respect of previously declared debts have been made. This provision is designed to discourage irresponsible lending and borrowing.
476.The section also provides that repayments must be made by instalments and the amount of instalments must be determined in accordance with regulations. The regulations must make provision for instalments to be determined by reference to the debtor’s surplus income. The section also allows the court to order repayments to be made by other means, such as by lump sums, in addition to the regular instalments, for example, where the debtor disposes of property.
Section 112F – Presentation of bankruptcy petition
477.Sections 112F to 112I set out the requirements that must be imposed by an AO on certain creditors for as long as the AO is in force.
478.The first requirement, in section 112F, provides that any qualifying creditor of the debtor is to be prohibited from presenting a bankruptcy petition against that debtor, unless he has the court’s permission. This is similar to the current provision under section 112(4) of the CCA 1984. However, unlike section 112(4), this new section does not include a prohibition on a creditor joining in a bankruptcy petition that has been presented by another creditor. So, if a qualifying creditor obtains the court’s permission to present a bankruptcy petition (or if a non-qualifying creditor presents a petition without the court’s permission), then all of the debtor’s creditors will be able to join in those bankruptcy proceedings. If this leads to the making of a bankruptcy order against the debtor, then the court which made the AO will be required to revoke that AO (see section 112U(4)(b)).
Section 112G – Remedies other than bankruptcy
479.This section sets out the second requirement that must be imposed by an AO on certain creditors. This is similar to the current provision under section 114 of the CCA 1984. It prohibits qualifying creditors from seeking to recover their debt by pursuing any other remedy (that is, other than bankruptcy) without the court’s permission. However, regulations may be made under this section to exempt certain creditors from this requirement in appropriate circumstances. For example, exemptions will apply in respect of debts that are a criminal fine, a student loan or that are due under an order made in family proceedings or maintenance assessments made under the Child Support Act 1991. In relation to these particular types of debt, it is appropriate that the creditor should be free to recover the debt from the debtor, even though an AO is in force. These exceptions will be in line with those categories of debt which are non-provable in bankruptcy proceedings. The revised ERO scheme and the new DRO and DRP schemes will have similar exemptions. This ensures a consistent approach, which is essential to facilitate movement between these schemes for those debtors who need it.
Section 112H – Charging of interest etc.
480.This section sets out the third requirement that must be imposed by an AO on certain creditors. Any creditor under a scheduled debt is prevented from charging any interest, fee or charge in respect of the scheduled debt during the life of an order.
Section 112I – Stopping supplies of gas or electricity
481.This section sets out the fourth requirement that must be imposed by an AO on certain creditors – in this case, creditors who are domestic utility suppliers. This largely replicates what would have been section 112A of the CCA 1984, had section 13(5) of the CLSA 1990 been commenced. However, these provisions are limited to imposing restrictions on electricity and gas suppliers because the Water Industry Act 1991 already restricts the powers of water suppliers in relation to domestic supply of water.
Section 112J – Application for an order
482.Unlike the current provisions, which allow the court to make an order on its own initiative, this new section provides that an AO can only be made on the application of the debtor. It also removes the current need for the debtor to have at least one court judgment in respect of any of his debts. This will ensure that a debtor who needs the protection of an AO is able to obtain an AO without first having to wait for one of his creditors to take him to court.
Section 112K – Duration
483.This section differs from the current legislation by setting a maximum overall limit of 5 years on the duration of an AO. At present, AOs are not time limited. Section 112(9) of the CCA 1984, which was to be inserted into that Act by section 13(4) of the CLSA 1990 had it been commenced, limited AOs to a maximum period of 3 years. An order will cease to have effect 5 years after the date on which it was made, unless the court has specified an earlier date in the order. If the court specifies an earlier date when it makes the AO, then it may subsequently extend the length of that order under section 112S (variation of duration), provided that the overall length remains within the 5 year time limit from the making of the order. The court may also revoke an AO before it is due to expire, under section 112U or section 112V (duty and power to revoke order), and in those cases the order will cease to have effect in accordance with the revocation.
484.The intention is to make the AO scheme more effective by providing certainty about the length of the order, as well as an opportunity for a debtor’s rehabilitation (because of the fixed term), a reasonable return to creditors and an incentive to maintain the repayments.
Section 112L – Effect on other debt management arrangements
485.This new section defines the relationship between an AO and the other debt management arrangements set out in subsection (6), which are EROs, DROs and DRPs. It provides that when an AO is made, any other debt management arrangement which had effect in relation to the same debtor immediately before it was made will cease to have effect automatically when the AO is made. Provision is also made for the court to notify the provider of the other arrangements as soon as practicable, or as soon as it becomes aware of their existence, of the making of the AO. Similar provisions are incorporated into the revised ERO scheme and the new DRO and DRP schemes This will ensure that no more than one debt management arrangement has effect in respect of the same debtor at the same time.
Section 112M – Duty to provide information
486.This new section applies as long as an AO is in force and requires a debtor, who is the subject of an AO, to supply information about his earnings and income (including, for example, any cash that he might win or receive as a gift) and his assets and expenditure at intervals to be specified in regulations. The information to be provided must include details of any anticipated changes that are likely to occur before the next statement is due, for example if the debtor knows that he is due to receive a bonus in his next pay. Additionally, debtors will be required to notify the court within a period, again to be specified in regulations (probably 7 – 14 days), before he disposes of any property (including cash) that is above a set value, to be specified in regulations.
487.This new provision is intended to facilitate the court’s role in actively managing an AO, for example by exercising its powers to vary or revoke the order where appropriate.
Section 112N – Offence if information not provided
488.This section provides that any failure to provide information, as required under section 112M, is an offence which is punishable by a county court judge who may impose a fine of not more than £250 or imprisonment for not more than 14 days. This offence is not a criminal offence; instead it is treated as if it were a contempt of court. The penalty is equivalent to that which applies to a debtor who fails to provide the information required by section 15 of the Attachment of Earnings Act 1971 (see section 23 of that Act).
Section 112O – Existing county court proceedings to be stayed
489.This section provides that any county court proceedings that were pending against the debtor when the AO was made, must be stayed if the following conditions apply:
	the proceedings relate to one of the debtor’s qualifying debts and they are not bankruptcy proceedings;
	following the making of the AO, the creditor under that debt is unable to enforce it because of the prohibition referred to in section 112G (remedies other than bankruptcy); and
	the county court, in the proceedings which are to be stayed, has notice of the AO.
490.Where proceedings are stayed under this section, the county court has discretion to allow the creditor any costs incurred in the stayed proceedings. Those costs may be added to the qualifying debt or, if the debt is scheduled to the AO, to the amount scheduled in respect of the debt but only if the court is not under a duty to revoke the order because the total qualifying debts, including the costs, exceeds the prescribed maximum (see section 112U(6)(b)).
Section 112P – Appropriation of money paid
491.This section provides that monies paid by a debtor under an AO will first be appropriated towards court fees and then towards the debts scheduled to the order. So, a debtor need not pay the court fees up front; instead, they can be paid from the monies the debtor pays to the court under the AO.
Section 112Q – Discharge from debts
492.This section places a duty on the court to discharge the debtor from a scheduled debt and to de-schedule the debt where the debt is repaid to the extent provided in the order, even if the debt is not repaid to its full extent. Once all of the scheduled debts have been repaid to the extent required by the order, then the court must revoke that order.
Section 112R – Variation
493.This section provides that the court may vary an AO on its own initiative or on the application of either the debtor or a qualifying creditor. This provision allows the court to take a more pro-active role in the management of the order by being able to react to information received from the debtor under section 112M.
Section 112S – Variation of duration
494.This section makes provision to allow the court to vary the duration of an AO. So, for example, an AO that was due to come to an end after 5 years from the day it was made can be shortened so that instead it comes to an end after 4 years from the day it was made. Similarly, an AO that was due to come to an end after 3 years, can be extended so that it continues to have effect for a further 2 years. But the overall duration of an AO (including any extensions under this section) must not exceed a period of 5 years from the day it was made.
Section 112T – De-scheduling debts
495.This new section enables the court to use its power of variation under section 112R to vary an administration order by de-scheduling the debt, if it appears to the court that it is just and equitable to do so. This will normally be when debts have been incorrectly scheduled to an order.
Section 112U – Duty to revoke order
496.This section makes provision for the revocation of an order on specified grounds. It places a duty on the court to revoke an AO if it becomes apparent that at the time the order was made, or subsequently, the entry criteria in section 112B were not or are no longer met. That is where the debtor:
	did not have two or more qualifying debts/does not have any qualifying debts;
	had/has a business debt and in either case he is still a debtor under that debt;
	was excluded under the AO, voluntary arrangement or insolvency exclusions (as defined in section 112AH), is now excluded under the voluntary arrangement exclusion or is now the subject of a bankruptcy order;
	was/is now able to pay all of his qualifying debts;
	had/has total qualifying debts exceeding the prescribed maximum; and
	had/has surplus income less than or the same as the prescribed minimum.
Section 112V – Power to revoke order
497.This section gives the court, on its own motion or on the application of either the debtor or a qualifying creditor, a general power to revoke an AO in circumstances where it does not have a duty to do so. This power may be used particularly where a debtor fails to make two payments (whether consecutive or not) required by the order under section 112E or fails to provide information required under section 112M.
Section 112W – Effect of Revocation
498.This section confirms that if an order is revoked under a duty or power in this Part, then it ceases to have effect in accordance with the terms of the revocation.
Section 112X – Notice when order made, varied, revoked etc
499.This section imposes a duty on the court to send notice to all creditors with scheduled debts if and when the following things happen:
	when an AO is made, varied or revoked;
	when a debt is scheduled to the order at any time after it is made;
	when the court itself is given notice that another debt management arrangement has been made (with the consequence that the AO has ceased to have effect automatically).
Section 112Y – Failure to take account of all qualifying debts
500.This section places a duty on the court to schedule an undeclared debt to an AO if the following conditions apply:
	an AO has been made but because of an undeclared debt, the total amount of the debtor’s qualifying debts was not properly calculated;
	the undeclared debt is due, whether or not it became due before or after the AO was made; and
	the total debt is less than or the same as the prescribed maximum.
501.If the undeclared debt is not yet due, the court must schedule the debt to the order when it becomes due. Where the inclusion of the debt would result in the total debt exceeding the prescribed maximum, the court must instead revoke the order.
502.nder this section, the court must take account of any representations (including representations about why a debt should not be scheduled) in accordance with section 112AG(5)).
Section 112AA – Main definitions
503.This section explains the meaning of key expressions used in this Part. In particular, it confirms that the terms “administration order” and “debtor” have the meanings given to them in new sections 112A and 112B, respectively. It also defines “qualifying creditor” as a creditor under a qualifying debt and confirms that, subject to the normal rules of court, “proper county court” refers to the court that made the order.
Section 112AB – Expressions relating to debts
504.This section defines a “qualifying debt” as any debt that is not secured against an asset or specified in regulations. A “business debt” is defined as a debt incurred in the course of a business. This section confirms that references to debts include only those debts that have arisen and therefore contingent debts are not included.
Section 112AC – Inability to pay debts
505.This section specifies that a debtor is considered to be unable to repay a debt if, when the debt is due, he fails to pay it (if the debt is repayable by a single payment) or, he fails to make one or more payments (if the debt is repayable by a number of instalments) and is unable to pay the single payment or all of the missed payments.
Section 112AD – Calculating the debtor’s qualifying debts
506.This section requires the court to calculate the total amount of a debtor’s qualifying debts by taking into account all qualifying debts that have arisen before the calculation, including those which are not due to be paid at the time of the calculation (that is, where payment is deferred). This ensures that the court is aware of the true extent of a debtor’s indebtedness. In addition, the section requires regulations to make further provision about how the total amount of a debtor’s qualifying debts is to be calculated and enables regulations to make provision about how the amount of any particular qualifying debt is to be calculated.
Section 112AE – Calculating the debtor’s surplus income
507.This section requires the debtor’s surplus income to be calculated in accordance with regulations which must make provision about what is surplus income (this is likely to be the difference between average income, over a specific period, and justifiable expenditure) and the period by reference to which the debtor’s surplus income is to be calculated. The regulations may allow the court to take into account the debtor’s assets, such as his savings, when calculating his surplus income.
Section 112AF – Debts becoming due
508.This section specifies when a debt, which is repayable by a single repayment or by a number of payments, becomes due. The debt becomes due when the time for making the single payment or the first of the payments is reached.
Section 112AG – Scheduling and de-scheduling debts
509.This section explains when a debt is scheduled to and de-scheduled from an AO. If the amount of the debt and the name of the creditor under the debt is included in a schedule to the order, the debt is scheduled to the order. The debt is de-scheduled when this information is removed from the schedule. The court must not schedule or de-schedule a debt without having regard to any representations from any person about why the debt should not be scheduled or de-scheduled. However, where an undeclared debt is scheduled under section 112Y, the court need not have regard to any representations made by a debtor about the scheduling of that debt. Also, where a debt is de-scheduled because a debtor is discharged from his debt under section 112Q, the court need not have regard to any representations made by any person.
Section 112AH – The AO, voluntary arrangement and bankruptcy exclusions
510.This section defines the AO, voluntary arrangement and bankruptcy exclusions, which are relevant to the court’s power to make an AO (see section 112B(4)). It specifies that a debtor is excluded under the:
	AO Exclusion if he currently has an AO, or he previously had an AO within the last 12 months. For this purpose, the 12-month period begins on the day that the previous AO ceased to have effect. But a debtor who has had an AO within the last 12 months is not excluded under this provision if the previous AO (a) ceased to have effect by virtue of another debt management arrangement listed in section 112K(7) coming into force, or (b) was revoked for the reason that the debtor no longer had any qualifying debts (see section 112U(1)(b));
	Voluntary Arrangement Exclusion if the debtor is the subject of an interim order under section 252 of the Insolvency Act 1986 (interim court order pending an individual voluntary arrangement) or where he is bound by an individual voluntary arrangement approved under Part 8 of that Act;
	Bankruptcy Exclusion if a petition under Part 9 of the Insolvency Act 1986 has been presented in respect of the debtor but has not yet been decided, or if the debtor is an undischarged bankrupt.
Section 112AI – Regulations under this Part
511.This section provides the Lord Chancellor with powers to make regulations under this Part.
512.Subsection (2) of this section enacts Schedule 16.