If you are thinking of applying for an administration order, think very care- fully. It may be the worst option open to you.
Administration is one of the oldest and eventually the most expensive way to pay a reduced amount towards your debt.
If you are placed under administration, you must apply to the court through an attorney or an administrator. If your debt exceeds R50 000, you will not qualify for administration. This means, if you are paying off a bond or vehicle finance, you may not qualify for an admin order.
Facts about being under administration:
- Administrators charge for bringing the application to court and take a portion of what you pay them each month (between 12% and 15%). Many even charge more than they are entitled to in terms of the court tariff.
- Interest continues to be charged on each account and because the instalment you pay is usually much less than you were contracted to pay, and you only pay every three months, you usually end up paying much more.
- While this is an option in law, many consumers have complained that they were not properly advised about the effects of an administration order, and end up being worse off than before.
- You will be listed on credit bureaus for a minimum of 10 years, which means you will not be able to buy anything on credit.
How to be removed from administration:
You can be removed from administration if there is good cause for a rescission of the admin order. The term ‘good cause’ means you can afford to pay the normal contractual instalments on your accounts. You can apply that the Magistrate Court in terms of the Magistrates Act, 1944 (ACT no.32 of 1944) remove you.
If you are over-indebted, it is better to go for debt counselling in terms of the National Credit Act. This is a holistic option where all your debt is covered, including bonds, vehicles, credit cards and furniture accounts. Debt counselling enables you to retain your assets. Once you have applied for debt counselling, you will pay a reduced monthly amount with the benefit of drastically reduced interest on all your accounts.
* Marilyn Williams is a registered debt counsellor.