What is an Administration Order?
You can take out an administration order which legally hands over the management of your financial affairs to a debt administrator, in order to protect yourself from credit providers taking legal action against you. Your income will then go to the debt administrator and, after deducting your living expenses from this amount, they will then distribute the rest of your money equally between your credit providers. According to the Magistrate’s Court Act, the administrator can take a maximum fee of 12.5% of the amount that they distribute to your credit providers.
Why are administration orders risky?
Because an administrator isn’t required to register with a regulatory body, unless they are an attorney registered with the law society, the potential for abuse is high.
Some administrators don’t comply with the 12.5% cut off and charge vast amounts or don’t pay off your credit providers for you as they are supposed to, so your debts never get settled and you end up even deeper in debt.
Administration orders are, however, limited to outstanding debts of no more than R50 000, while fees are restricted to 12.5% of instalments.
Should you consider going under administration?
When you are under administration, you are protected from any legal action being taken against you by your credit providers, but only if you comply with your regular payments. If you have overdue medical bills, municipal accounts, school fees or other credit agreement that don’t fall under the NCA, you won’t qualify for debt review and, therefore, administration is an alternative you might consider – as long as you ensure that the administrator is trustworthy and reliable.