The Weardale Railway opened in July 2004

Weardale Railway went into voluntary administration in January 2005 with debts of more than �1m.

Since then, creditors, administrators PricewaterhouseCoopers and public funding representatives have been trying to come up with a rescue plan.

Creditors will be offered 25p for every �1 they are owed and a London-based company will take over operations.

Joint administrators of Weardale Railways Limited, Ian Green and Steve Ellis of PricewaterhouseCoopers, have called a meeting of creditors for 27 January to discuss the rescue plan, which is likely to cost about �500,000.

A spokeswoman for PricewaterhouseCoopers said: "The proposals offer a dividend of 25p in the pound to the unsecured creditors.

"Should the proposals be accepted by the creditors, the constitution of the board of the company will alter and ECT Group CIC will, in due course, become responsible for the operation of the railway, supported by Weardale Railway Trust volunteers."

The �5m project opened in July 2004, running trains on a five-mile stretch of restored track and won cash from the Heritage Lottery Fund among others.

But the number of passengers fell about 12,000 short of what was expected by the end of its first year.