Debt administration is a situation where you cannot pay all their debts and you get a ‘debt administrator’ (usually a lawyer) to arrange paying the debts off in smaller amounts over a longer time. The administrator will look at your total income and your expenses for basic needs, and see how much is left for your repaying your loans, retail debts, insurance, etc. The administrator will then apply – through the court – to have a certain amount of your income set aside for basic needs. The rest will be distributed amongst the people and companies you owe money to (your creditors).
Does it cost money?
Yes, the costs are:
Administrator’s fees – to apply for the administration order (you only pay this once);
Administrator’s fees – to assist you to pay your creditors (you pay this every month, and the amount is capped at 12,5 % of the amount collected);
Employer’s fee (5%) – if your employer has to deduct money for creditors from your salary before you get paid (these deductions are called emolument attachment orders); and
Interest on the debts that you owe to creditors.
Who can apply for an administration order?
If your debts are R50,000 or less – and you have no assets that can be sold to pay back the debt – then Section 74 of the Magistrate’s Court Act allows you to apply to the court for an administration order. This order will temporarily protect you from your creditors and enforces a repayment plan that enables you to repay you debts while still keeping some money for your basic living costs.
Do you really need an administration order?
It is very important to work out whether or an administration order is the right solution for your debt problems, before your rush into it. The question to ask is:
Will administration put you in a better position than before – with your debts paid off in a reasonable time – or will you end up with more debt than before?