What is Debt Administration?
If you want to protection from credit providers taking legal action against you, you can apply for a debt administration court order. This order legally hands over the management of your financial affairs to a debt administrator.
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 is Debt Administration Risky?
Because an administrator isn’t required to register with a regulatory body, the potential for abuse is high.
Some administrators don’t comply with the 12.5% maximum fee 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. Also, debt administration orders are limited to an outstanding balance of no more than R50 000.
Administrators aren’t regulated the way debt counsellors are, so it’s difficult to know whether or not they are trustworthy. And, seeing as debt administration involves putting your livelihood in the hands of another, the risk you are putting your finances at is great.
What is the Alternative to Debt Administration?
We offer professional debt counselling at National Debt Advisors, whereby we approach your credit providers and negotiate with them to have your instalments reduced.
In this way, you will be able to afford your repayments each month, as well as cover all of your living expenses. In addition, your credit providers won’t be allowed to contact you or to take legal action against you, giving you some much needed debt stress relief.
As you can imagine, it’s really a win-win for all concerned and a far better, safer approach than debt administration!