WHAT IS AN DEBT ADMINISTRATION ORDER?
An Debt Administration Order is granted when a debtor is unable to meet his/her financial commitments.
His/her expenses exceed his/her monthly income. As a result of this he/she is faced with unpaid bills and creditors hounding him/her for payment.
An application is made to court for the granting of an Administration Order in his/her favour.
THE LEGAL PROCESS
Once an application for an Administration Order is made the creditors are informed immediately by registered post. Thereafter all correspondence from creditors will be directed to the Administrator who is now in charge of the administration of the debt.
The Administrator will liaise directly with the creditors to ascertain updated balances on all accounts and negotiate with creditors on your behalf. With regard to accounts that are handed over, the Administrator will liaise with the collecting agent or representative of the creditor.
Once the Administration Order is granted in court, a copy of the order is sent by registered post to all creditors on record. The paymaster is informed immediately to stop all garnishee orders against the client’s salary and implement the Administration Order.
Think twice about Administration Orders:
Think twice about Administration Orders. If you have no tangible assets and an accumulative debt of up to a maximum of R 50,000.00 you can apply for debt administration. An Administrator generally receives your income and pays you an amount to cover your living expenses; the remainder is then used to pay your debt and any expenses due to the administrator. However the fees are not properly regulated and often 70% of your available funds for distribution are swallowed up by collection costs resulting in you never paying off your debt. (In many instances your debt has increased as there has been no reduction in your interest rates). Consumers should be aware that it is a costly alternative because Administrators take 12.5% of the monthly payments for their services while the employers take another 5% “management fee” because they must pay the administrator the designated sum every month.
Furthermore, consumers are often not aware that the administration listing will reflect on your credit record for 10 years and you may not apply for credit in this period.
Some administrators do not comply with this provision and charge far more than R 1,200.00 to obtain the administration court orders and 22.5% percent or even more for the monthly service fees. Some administrators do not pay over the money to the creditors and this leads to mounting debt that is never settled.
Debt Review is a better option:
All Debt Counsellors are regulated by the National Credit Regulator including providing guidelines of all fees charged. All consumer funds are paid to a regulated and approved Payment Distribution Agency and distributed monthly to Credit Providers. Debt counselling could be an option for those who would like to become debt free while being able to offer legitimate legal protection to ones assets such as your home or car.
Debt counselling provides the opportunity to bring your monthly debt repayments down by as much as 30 – 50% (but debt counsellors have been able to negotiate reductions as much as up to 60% in the past). Professional Debt Counsellors can negotiate lower negotiate reduced installments and interest rates with your Credit Providers allowing you to settle your debt in a reasonable period to become debt free. The outcome is one affordable monthly installment, making provision for you to cover your normal living expenses as well.
When you become debt-free or are no longer over-indebted, your credit record is updated accordingly, you are issued a Clearance Certificate and you may re-enter the credit market. Don’t hesitate or delay any longer. Call us now, our consultants are waiting to help you through the process and explain everything in a transparent manner with integrity and understanding.
Is Debt Counselling Administration?
NO, Debt Counselling / Debt Review is not Administration. The differences between the two are as follows:
- Debt Counselling has no limit to the amount of debt and can also include your houses and vehicles. Administration has a cap of R50 000.
- With Administration you are blacklisted while with Debt Counselling you will only be flagged at the credit bureau and you will be cleared after a clearance certificate is issued by the Debt Counsellor upon completion of your repayments towards all your creditors.
- Administration fees are much more than Debt Counselling Fees, as Debt Counsellor Fees are regulated by the National Credit Act No. 34 of 2005.
- Debt Counselling is focused on consumers with assets and larger debts, where Administration is the answer for the consumer with smaller debts.
WHAT IS THE DIFFERENCE BETWEEN DEBT REVIEW, ADMINISTRATION AND SEQUESTRATION?
Debt review and Administration are viable debt solutions, offered to South African consumers struggling to make their debt repayments who are faced with financial difficulty. These debt solutions, however they have several differentiating factors.
Administration is a debt solution implemented by an Administrator whereby the client’s current debt instalments are reduced and the credit providers receive a debt repayment once every three months. It is a legal process whereby the debt repayment terms are extended, but the downfall lies with the fact that the process is lengthy and takes much longer than debt counselling.
There is currently “talk” of the archaic legal practice of Administration (originated in 1944) being abolished as it is no longer a viable debt solution in our current economical climate.
- Interest rates to credit provider are only reduced to 15.5%.
- The terms of the repayments are extended indefinitely (meaning you pay until the debt is eventually paid).
- Payments are only distributed every 3 months (interest adds up as well as the creditors various fees and costs).
- Is only applicable for debts that total less than R50, 000.00
- The Administrators fees are 12.5% + VAT + distribution costs per month (its take a large portion of your monthly instalment).
- Client’s payment often becomes a salary deduction (by way of an E.A.O. Emoluments attachment order), so your employers will find out.
- Your employer is also entitled to take another 5% “management fee” because they must pay the administrator the designated sum every month.
With over 11 years of specialized experience in the debt & legal field Oyisa United Debt Specialists is committed to assisting South African consumers in financial liberation.