Debt Review vs. Administration Orders

Have you ever wondered what the difference between debt review and administration orders is? Knowing the difference between debt review and admin orders is important for distinguishing the consequences of each and how they could affect your life.

The difference between admin and debt review is that they are two different legal processes. Debt review employs a debt counsellor to negotiate with creditors to restructure your debt, whereas administration orders allow creditors to apply to declare you bankrupt.

Administration orders and debt review are better alternatives to sequestration, a legal process where creditors can apply to declare you bankrupt. Of course, all three negatively impact your credit report.

This post outlines the following:

• The difference between administration orders vs. debt review.
• Their respective consequences.
• Tips for undergoing both processes.
• Tools and hacks to get the most out of both.

Let’s get into it.

Comparing debt review and administration orders

Let’s take a closer look at debt review and administration orders.

Administration orders

This is an order made by the Magistrate’s court that a debtor must pay their respective creditors what they owe. They’ll make a repayment plan where you make repayments in affordable monthly instalments. Your estate will be placed under administration– “administration order”–by an administrator who ensures your debts are paid off as per set out terms. You can apply for an administration order if your debt is less than R50 000 and you’re struggling to pay it off. Administration orders don’t stop interest running.

Debt review

Debt review is when a debtor applies with a debt counsellor to rearrange their debts and finances with a debt management plan. The debt counsellor negotiates with creditors to reduce repayments, extend repayment terms and reduce interest rates, making your monthly repayments more affordable. During this time, you won’t be able to take out further credit because a debt review flag will be placed on your credit profile by the Debt Help System. You can apply for debt review even if your debt is more than R50 000 and you’re over-indebted.

Similarities and Differences

Now, let’s discuss the similarities and differences between each process.

Similarities

Debt review and administration orders have numerous things in common:

• Both are visible on your credit report and prohibit you from taking out more credit.
• You’ll have to make repayments in monthly instalments for both.
• Both mandate that you receive a clearance certificate upon repayment of your debts. You can use this to clear your name with the credit bureaus.
• Both protect you from creditors taking legal action against you.
• Administration and debt review both use PDAs (payment distribution agencies) to distribute payments among lenders.

Both are legal processes that rearrange your debt to make it affordable to pay. Plus, both prohibit lenders from granting you credit. If they do, it’s called reckless lending and it’s an offence.

Differences

On the other hand, both legal processes starkly contrast:

• Administration orders only rearrange debt up to the value of R50 000.
• Debt review/counselling uses a debt counsellor, whereas administration orders use administrators.
• Debt counselling reduces interest rates and debt repayments and extends repayment terms. Administration orders don’t.
• Administration orders can specify that you must sell your assets to pay debts, whereas debt review protects your assets.
• Admin orders can authorise garnishee orders (money is taken from your salary before it reaches your bank account).
• Administrators are allowed to take up to 12.5% of what you pay. In addition, your employer is allowed to take 5% of what you pay if there is an ennoulments order (similar to a garnishee order) attached. Conversely, debt counsellors are only allowed to collect set fees as set out in the National Credit Act.

As you can see, there are various differences between the two processes.

Tips to get the most out of both

Both protect you from creditors taking legal action against you. We advise opting for debt review if you want to protect your assets from losing your assets, gain immunity from legal action, and have your interest rates and repayments reduced. It’s also a good option if you don’t want to rack up even more debt by paying the 12% administration fee. Debt review is the cheaper option and saves you more money in the long run.

Tip: use the money you save from debt review and make additional payments to make repayments faster. You’ll be able to exit the debt review process and get your clearance certificate quickly. You can also get debt review for your car finance and credit card debt.

Need help with debt? If you would like to gain litigation immunity, protect your assets, and reduce interest rates and repayments, contact Debtco Group to invest in your future. Our debt counsellors have years of experience advocating for the over-indebted and helping them regain financial freedom.