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Debt Advice Handbook 15th edition

4. Court-based strategies

• General stay
• Administration order
• Bankruptcy and debt relief orders
• Individual voluntary arrangement
• Time order

General stay

If a court order has been made, or is about to be made, and there is no available income, capital or assets, the county court can make an order for a general stay of judgment or enforcement. This means that the court will order that there is no enforcement of the judgment either until something happens (eg, there is another court order following a change in the client’s circumstances) or for a fixed period, possibly with a review at the end. See here for an explanation of the court’s power to make such an order and how you can help the client make an application.

Administration order

If a client already has at least one county court (or High Court) judgment against her/him and her/his total debts do not exceed £5,000, s/he can apply for an administration order. The client makes one monthly payment to the court, which ‘administers’ it and divides it equitably among all creditors. See here for details.

Bankruptcy and debt relief orders

Bankruptcy is a legal procedure in which the inability of a client to pay her/his debts is acknowledged and the majority of unsecured creditors can no longer pursue their debts, which are eventually written off. A third party (known as the ’trustee in bankruptcy’) takes over the handling of the client’s financial affairs for the benefit of her/his creditors and distributes a proportion of any available income and/or capital resources to them.

Bankruptcy may be a suitable strategy for a client if:

•debts have arisen which creditors will not write off;
•s/he does not own a home or has little or negative equity;
•s/he does not have any available assets or capital;
•s/he has a low available income compared with the amount of debt, which means it would take many years to repay her/his creditors.

Although not strictly a court-based option, a debt relief order operates in a similar way to bankruptcy and may be an appropriate option for clients who have:

•total debts of £30,000 or less;
•available income of £75 a month or less;
•gross assets worth £2,000 or less (the client can also own a motor vehicle worth less than £2,000).

See Chapter 10 for further details, including the advantages, disadvantages and consequences.

Individual voluntary arrangement

An individual voluntary arrangement (IVA) is a means whereby a client can protect her/himself from further action from creditors by entering into a legally binding arrangement with them, supervised by an insolvency practitioner. It is often described as informal bankruptcy and may be a preferred option for a client if they have an asset that they could lose through bankruptcy and would not lose through an IVA – eg, their home. See Chapter 10 for further details.

Time order

An application for a time order may be appropriate either to prevent a creditor under a regulated credit agreement from obtaining a judgment or to freeze interest or other charges. See here for further details.