Debt Administration was a very popular way to get protection from creditors before the NCA came to an effect in June 2007. The correct name is Administration or to ‘go under administration’. You have an administrator that collects the money from your and distributes the money to your creditors.
What is an Administration Order?
Administration is a court order that you get to repay your creditors over a period of normally 5 years. Your creditors may not get repossession or attachment orders against you while in Administration.
You can use an administration order to remove current garnishee orders, but then there will be a new single garnishee order for the new administration order that replaces it.
One of the biggest short comings of the admin order is that you can only use it for claims below R50 000.00. So if all your debt is more than R50 000.00, you cannot apply for an administration order.
You cannot apply for administration order if you have assets that can be sold to repay your debt. This is not the case when applying for debt counselling.
An Administration order is very expensive. Up to 12% of your contribution to creditors will be deducted for fees. Debt counselling will have a higher initial cost, but will never be more than R300 per month. The actual monthly cost is the smallest of 5% of your contribution or R300pm.
The distribution to creditors only happen every 3 months when in Administration. In debt counselling the distribution is monthly. This is beneficial to creditors and over indebted customers because the regular payments will decrease the interest on the outstanding debt.
In general I recommend debt counselling above administration, but for small amounts and debt and if you have garnishee orders you would like to remove, I will recommend Administration.