Enforcement Restriction Orders – UK

Executive Summary

Part 5 of the Tribunals Courts and Enforcement Act (TCEA) 2007 included a package of measures designed to improve and extend the range of options available to assist the over-indebted. It was aimed at those with multiple debts but with relatively low levels of overall debt.

Chapters 1 and 2 of Part 5 dealt with the:

• reform of the Administration Order (AO) – effectively a long-term debt management scheme administered by the court; and
• introduction of an Enforcement Restriction Order (ERO) – to provide short-term assistance (via enforcement relief) to those who encounter a sudden and unforeseen change to their financial circumstances from which they are likely to recover within a relatively short period.

Section 106 of the TCEA 2007 substitutes a new Part 6 of the County Courts Act (CCA) 1984 (in respect of AOs) and clause 107 inserts a new Part 6A into the same Act (in respect of EROs). Copies of the new Parts are attached at Annex A for ease of reference.

Provision was made within these Parts allowing secondary legislation to define the parameters for each scheme. Sections 112AI and 117X provide for the Lord Chancellor to make regulations and the Government confirmed during Commons consideration that there would be consultation on the detail of the regulations to
underpin the revised AO and ERO schemes during 2007.

This paper therefore seeks views on the various limits that will apply to the AO and ERO schemes.

Current Situation

The AO scheme is a court administered debt management scheme and is currently restricted to those with maximum debts of £5,000, one of which must be a judgment debt. Once an order is made creditors named in the order cannot enforce their debts without leave of the court nor can they add interest or other charges to the debt. However, the lack of clarity about the nature of debts that can or cannot be included has led to differences of approach between courts.

This lack of consistency has been a cause for concern.

Proposed Changes

We intend to specifically exclude debts classed as non-provable in bankruptcy. These are fines, sums due under orders made in family proceedings or maintenance assessments made under the Child Support Act 1991. We also intend to exclude Government student loans. The Higher Education Act 2004 and consequent Regulations specifically prevent student loans being written off on discharge from bankruptcy. Monthly repayments on student loans are related to the borrowers income rather than the amount of the loan outstanding.

These provisions confirm the position taken during consultation and in Parliament. It will provide consistency with current insolvency practice and the Insolvency Services Debt Relief Order (DRO) scheme introduced by Chapter 3 of Part 5 TCEA 2007.

Additionally, provision has been made in the TCEA 2007 to allow debts that cannot be brought into either of the AO or ERO to be defined. For example, all secured debts (i.e. debts secured against an asset when the loan came into being) and business debts are excluded from both schemes by statute. Regulations may exclude other types of debt. Additionally, under the new provisions, orders must be revoked where a business debt is incurred during the currency of the order or where it is shown that any of the entry criteria were not, or are no longer met.

The TCEA 2007 also gives the Lord Chancellor the power to review and set a limit for the total amount of debt that can be included in an AO by secondary legislation. As stated in Parliament, we intend to set this at £15,000 initially. This is in line with the majority view from the consultation and aligns with the DRO.

Full Consultation Paper

The full consultation papger can be found online via this link. Administration and Enforcement Restriction Orders consultation paper

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