An Administration Order is a debt solution option for people whose outstanding unsecured debt, such as credit cards, personal loans, and overdrafts, is less than R50,000, regardless of whether they have a house bond or vehicle finance. The Magistrate's Court will grant an order upon application, in which the court determines a fixed monthly amount payable by the debtor.
An administrator will collect the monthly instalments for proportional distribution among the creditors on a three-monthly cycle until all the accounts are paid in full. An administration order is, therefore, a valuable option to protect and assist over-indebted individuals, allowing them to repay their debts orderly and affordable so that they may eventually re-enter the economy with dignity on discharge.
Anybody with unsecured debt, such as credit cards, personal loans, and overdraft facilities of less than R50,000, may apply. However, if you have secured debt such as a house mortgage or vehicle finance when the application is launched, the relevant accounts must preferably be up-to-date. Alternatively, the application must at least contain a provision to get the arrears up to date.
Although you can use this option to stop other creditors if you're behind on your bond or vehicle finance, it does not prevent the relevant secured creditor from taking legal action to realise their security by selling the property or repossessing the car. This debt administration process is a form of debt relief for people overwhelmed by debt whose estates are so small that they can't justify the costs of sequestration proceedings.
If you are married in community of property (without an Antenuptial Contract), your joint estate will be placed under administration. As a result, both parties need to:
An Administration Order's main aim is to offer protection against legal action from your creditors while enforcing a debt repayment plan that enables you to eventually settle your debts and still have money for your monthly living expenses. In addition, it also offers the following advantages:
An Administration Order will enable you to will sleep better, be more relaxed, and will be able to concentrate better, which will increase your ability to focus on your goals and plan for the future.
An Administration Order only has temporary disadvantages, which will disappear once the administration debt has been paid in full, mainly being:
The process involves an application in a prescribed form, which we prepare on behalf of our clients, made to the local Magistrate's Court in the area where you reside, carry on business, or are employed. The application includes an affidavit made by you as the applicant and a statement of your financial affairs that include the following:
If you are married in community of property, your spouse must support the application and include all their details. After preparation of the application and required documentation, it will be submitted to the relevant Magistrate's Court with the required supporting documents to be issued.
The Clerk of the Magistrate's Court will then provide a date on which the application will be heard. Provision will be made for payment of your property bond or vehicle instalment if you have one, and then a fixed monthly amount will be payable to service the rest of your debt which, as stated before, must be less than R50,000.
The Administration Order places the management of your financial affairs in the hands of a debt administrator. The court will issue an emoluments attachment order to deduct the fixed monthly amount from your salary. A copy of the application and supporting documents must then be delivered to every creditor in person or by registered post.
A Magistrate will hear the application on the specified date, and you will be required to attend the proceedings. Any creditors may also participate in the hearing and object to the debt listed in the application. After such an objection, the creditor must provide proof of the debt.
The Magistrate will allow or reject the debt and may postpone the application to consider the matter further. The Administrator will receive the monthly amount to distribute proportionately among your creditors on a three-monthly cycle after deducting certain administrative costs.
Once granted, the Administration Order must specify the monthly amount you must pay and the time of payment. The court will appoint an Administrator to enforce the Administration Order and may authorise an emoluments attachment order to deduct the amount directly from your salary. The Administrator must:
While an order is in force, no creditor may proceed with legal steps against you, except in limited circumstances, for example, a mortgage bond due. Upon full payment of the debt, the Administrator will lodge a clearance certificate stating that the costs of administration and the creditors have been paid in full with the Clerk of the Magistrate's Court and will send a copy of the clearance certificate to your creditors and employer.
Apart from the imposed limitation of R50,000 for unsecured debt, an Administration Order remains the most effective debt option to restructure the repayment of the debt, mainly due to its overall simplicity and the fact that it prioritized secured debt in contrast to debt review and counselling.
We always encourage our clients to settle the minor creditors first when they receive a yearly bonus, as it's a smaller amount to pay in full, such creditors are also more eager to have their accounts settled for partial payment, and it will save the client just as much on administrative costs as any large creditor.
An Administration Order usually starts at R2,500, which we bill according to the prescribed tariffs of the Magistrate's Court Act, but the price may increase as a result of matters such as:
Do note that an Administration Order is also subject to ongoing administrative costs for its duration, apart from the costs of the application itself.
The Administrator is allowed to take an administrative fee of up to 12.5% of the monthly payments received for the duration of the Administration Order. In addition, if an emoluments attachment order was granted and implemented, your employer may take a 5% management fee to deduct and pay the Administrator the specified instalment.
If you consider pursuing this option, email us at info@gmilaw.co.za for your free assessment, or please phone 087 057 1790 during office hours. We will email you a copy of our analysis at no charge and a detailed no-obligation quote for our further services.
Copyright © 2023 Rohan Lamprecht. Disclaimer: The information in this article is of a general nature for educational purposes only, relevant to the publishing date. Any opinions expressed are solely those of the author and do not necessarily reflect the views or opinions of Grobler Malopi Inc. The content is not intended to constitute professional or legal advice, and you are encouraged to call and consult with our attorneys to discuss your specific situation before making any decisions. Grobler Malope Inc - 087 057 1790 - info@gmilaw.co.za