Administration order checker

This checker tells you whether an administration order is open to you, and if it is, what it would actually look like: how much of each payment the administrator keeps, how much reaches your creditors, and how many months the order would run before interest. It is for people with modest debts and a steady income who have heard that "going under administration" stops creditors and want to know whether it applies to them and what it costs, and for the many who are offered an administration order by a debt administrator without being told about the ceiling, the fee or the alternative.

Administration orders are old law. The ceiling on debts has not moved since 1998, which is why they now suit only small debts, and the fee structure rewards keeping the order running. Debt review under the National Credit Act has no ceiling and has largely taken over for credit agreement debt. The checker compares the two.

What this calculator works out and who it is for

You enter your total debt, your monthly income after tax, your essential monthly expenses excluding debt repayments, the monthly payment you want to offer if you have one in mind, and whether most of your debt is under credit agreements such as loans, credit cards and store accounts. The checker returns whether you are within the R50 000 limit, your surplus after essentials, the payment to the administrator, the administrator's fee at the statutory cap, what reaches creditors each month, the months to clear the debt ignoring interest, and the total fees over that period.

It warns when the order would run for more than five years, when the proposed payment exceeds your surplus, when debt review is the better comparison, and about the credit record consequence.

How the calculation works

The checker first tests eligibility: an administration order is available only where total debts do not exceed R50 000. If yours do, it says so, and points to debt review if the debt is mostly credit agreements, or to negotiated settlements and sequestration if it is not.

Within the ceiling, it takes your proposed monthly payment or, if you left that blank, your full surplus after essentials. It applies the statutory cap on the administrator's remuneration and expenses, 12.5 per cent of the money collected, to that payment; what remains goes to creditors. It divides the debt by the monthly amount reaching creditors and rounds up to get the months to clear, and multiplies the monthly fee by that number to show the total fees paid. Interest is ignored, which means the months shown are a floor: if creditors continue to charge interest, as they usually may, the order runs longer.

The checker also considers your surplus. If there is none, it tells you there is nothing to offer and the order is not a realistic route. If the payment you propose exceeds your surplus, it warns that the court sets the instalment on what you can actually afford.

The law behind the numbers

Sections 74 to 74W of the Magistrates' Courts Act 32 of 1944 govern administration orders. Section 74(1) allows a debtor who is unable to pay their debts immediately, and whose total debts do not exceed the amount determined by the Minister by notice in the Gazette, to apply to the magistrate's court of the district where they live, work or carry on business for an order placing their estate under administration. The amount was set at R50 000 by Government Notice R1411 of 30 October 1998 and has not been changed since; the South African Law Reform Commission has described it as outdated, and Parliament has not moved. In 1998 R50 000 was a meaningful sum; it now excludes most people with serious debt.

If the court grants the order, it appoints an administrator, who may be an attorney or any fit person, and orders the debtor to pay a weekly or monthly amount to the administrator. Section 74J requires the administrator to distribute the money collected among the creditors pro rata at least once every three months. Section 74L allows the administrator to deduct necessary expenses and remuneration at the tariff before distributing, and caps the total at 12.5 per cent of the amount collected; any interested party may have the administrator's account taxed by the clerk and reviewed by a magistrate. While the order stands, creditors listed in it may not take or continue legal steps against the debtor for those debts, and the debtor may not incur further credit without the administrator's consent. Certain debts, including maintenance and debts incurred after the order, fall outside it.

The order is noted on the debtor's credit record and remains there until it is rescinded. Rescission requires an application to the court once the debts have been paid, or earlier if the debtor's circumstances have changed enough to pay them directly. Many people find years later that an order they thought had ended is still on their record because nobody applied to rescind it.

Debt review under sections 86 to 88 of the National Credit Act 34 of 2005 is the alternative for credit agreement debt. A debt counsellor assesses over-indebtedness and proposes a restructured repayment plan, which the magistrate's court makes an order; creditors may not enforce while the review stands; the debt counsellor's fees are regulated by the National Credit Regulator rather than by a percentage of collections; and there is no ceiling on the debt. A consumer cannot be under debt review and an administration order at the same time, and debt review does not cover debts that are not credit agreements, such as municipal accounts, school fees or a judgment for damages. The debt relief options checker compares the routes more widely.

Worked example

Sello owes R30 000 across a store account, a personal loan and a municipal account. He earns R12 000 a month after tax and his essential expenses are R10 000. He is thinking of offering R2 000 a month under an administration order.

The debt is within the R50 000 limit, so the order is available. The administrator may take up to 12.5 per cent of the R2 000, which is R250, leaving R1 750 for creditors. R30 000 divided by R1 750 is 17.1, so eighteen months to clear the debt before interest, and R4 500 in fees over that time. The checker reports R1 750 a month reaching creditors and about eighteen months to clear R30 000. It warns that if most of the debt is under credit agreements, debt review has no ceiling and different fees, and that the order will sit on his credit record until rescinded.

Change the figures: Sello owes R60 000. The checker says the order is not available and, because the debt is mostly credit agreements, directs him to debt review. Or Sello can only afford R600 a month: R525 reaches creditors, the order runs for 58 months before interest, and the fees over that time are R4 350 on a R30 000 debt, which is the long, expensive order the five-year warning exists to flag. A negotiated settlement with the three creditors, or debt review, would very likely end sooner and cost less.

What the calculator does not include

It does not calculate interest. Creditors under an administration order usually continue to charge interest at the contract rate, which lengthens the order, and the checker's months are a floor.

It does not calculate the court application fee or the administrator's expenses in detail; it applies the 12.5 per cent cap as the fee.

It does not assess whether the court will grant the order, which depends on the magistrate being satisfied that you cannot pay immediately and that the order is appropriate.

It does not model debt review's fee structure or timeline, or sequestration.

It does not deal with debts that fall outside an administration order, such as maintenance, or with secured debt such as a home loan, where the creditor can still realise its security.

When to get advice

Before applying for an administration order, speak to a registered debt counsellor about debt review if your debt is mainly credit agreements; the first consultation is free and the counsellor must tell you whether you qualify. Speak to Legal Aid South Africa or a community advice office if your debt is mainly municipal, medical or school fees, which debt review does not cover, because an administration order may then be the right tool despite its age. Get advice before signing anything a debt administrator puts in front of you, especially a mandate that lets the administrator charge fees before the court has granted anything, and ask what happens to the money you pay if the application fails.

If you already have an administration order and have paid off the debts, apply to rescind it. Until that is done it stays on your credit record and continues to block credit.

Frequently asked questions

What is the maximum debt for an administration order? R50 000 in total, set by notice in 1998 and unchanged since. Above that the order is not available and debt review, which has no ceiling, is the usual route for credit agreement debt.

How much does the administrator take? Up to 12.5 per cent of the money collected, covering remuneration and expenses, under section 74L. On a R2 000 monthly payment that is R250, leaving R1 750 for creditors. You can have the administrator's account taxed if you think the charges are wrong.

Does an administration order stop creditors? Yes, for the debts listed in it. Creditors may not take or continue legal action against you for those debts while the order stands. Debts incurred afterwards, and maintenance, are not covered.

How long does it last? Until the debts are paid, which depends on the payment and on interest. At a small payment it can run for many years, and it stays on your credit record until a court rescinds it.

Is debt review better? For credit agreement debt, usually. It has no ceiling, the fees are regulated differently, and it ends with a clearance certificate that clears the flag. It does not cover debts that are not credit agreements, where an administration order can still help.

Can I get credit while under administration? Not without the administrator's consent, and in practice not at all, because the order is listed at the credit bureaus.

How do I end an administration order? By applying to the court for rescission once the debts are paid. It does not fall away on its own.