Step 3 Choose your debt solution – Debt solutions at a glance 3 Zara’s story Zara’s debts became unaffordable after a relationship breakdown. She owed £1,000 in mortgage arrears and £15,000 to her non-priority creditors. She had £145 per month available for creditors and was paying £45 of this towards her mortgage arrears. Zara worked out that it would take over nine years to pay her debts back. There was a small amount of equity in Zara’s home, but she didn’t have any other assets. Zara didn’t want to deal with her creditors directly. She was initially interested in a DMP as she wanted to pay her debts in full. However, the thought of being in debt for nine years concerned her and she knew it could take longer if her creditors added interest and charges. Zara considered bankruptcy, but decided she wasn’t prepared to put her home at risk. She finally opted for an IVA because she knew how long it would take and that interest and charges would be stopped. She was okay about the fees as she knew she would be debt-free in five to six years. Administration order (AO) You pay a monthly amount to the court. They share it out to the creditors included in Formal solution your AO. These creditors can’t take any further action without the court’s permission. What debts are Non-priority debts and some priority debts. included? Is there a minimum or You need at least two debts, but must owe less than maximum debt amount? £5,000. How long will it last? No time limit, but the court may agree to set one. Is there a fee? The court takes 10% of your monthly payment as costs. Some things to consider You need to have a county court or high court judgment in your name. You need to be able to afford payments to the AO. Interest and charges are stopped. Debts have to be paid in full unless you ask the court to limit how long you pay for. Courts often agree a three-year limit. See our Administration Creditors can object, but the court will decide whether to orders fact sheet. make the AO. Page 77