Section 74 of the Magistrate’s Court Act (44 of 1932) provides relief to people with debt of less than R50’000,00. Such people may apply to the Magistrate’s Court in the area where they reside or work for an order placing their estates under administration.

The requirements to be placed under administration are as follows:-

  • Total debt of less than R50’000.00

  • Demonstrate that you are unable to afford the installment payable in respect of these debts and does not have movable assets that can be sold to settle such debts.

If you meet the aforesaid criteria the court will place your estate under administration and appoint an administrator to attend to the administration thereof. In almost all instances the court will appoint the attorney assisting you with the court application as your administrator.

What is the effect of being placed under administration?

  • The court will determine a single monthly installment payable by you to your administrator, who’s duty it is to distribute this amount amongst you creditors until all your debts have been paid in full (distributions are made quarterly);

  • Whilst under administration no legal action may be taken against you by your creditors without the express permission of the court that placed your estate under administration;

  • Any legal action, including emoluments attachment orders / garnishee orders are suspended when your estate is placed under administration.

How is the installment I pay calculated ?

  • When applying to have your estate placed under administration a prescribed affidavit needs to be attested to. In this affidavit a breakdown of your income and expenses are provided.

  • In this affidavit you will make out your case as to what you can afford to pay towards the settlement of your debt.

  • The court has a discretion to set the installment at any amount the court deems reasonable after considering your income and expenses.

  • In practice the amount suggested by the applicant is in most instances accepted and will be the amount that the court will order the applicant to pay.

How long will I be under administration?

  • This will depend on your total debt, the installment payable and the interest rates charged on your debt.

  • Needless to say the more you pay the quicker the debt will be settled.

  • It is important to make sure from the outset that your repayment plan make sense for instance



John’s debt amounts to R45’000.00. The average interest payable on this debts are 18.5% per year. This amounts to annual interest of R8’325.00 per year or R693.75 per month on his debt. The repayment periods for different installments are considered: –

An installment of R1’000,00 per month.

  • From this amount should be deducted the administrator’s fees of 12.5% plus VAT (Effectively 14.375%). This will amount to R143.75 and will leave R856.25 for distribution amongst creditors. As R693.75 of the amount will go towards interest only R162.50 will go towards the settlement of capital. In this expamle the repayment would take 9 years and 1 month.

An installment of R1’500,00 per month.

  • From this amount should be deducted the administrator’s fees of 12,5% plus VAT (Effectively 14,375%). This will amount to R215,63 and leave R1’284,37 for distribution amongst creditors. As R693,75 of this amount will go towards interest only R590,62 will go towards the settlement of capital. In this example the repayment would take 4 years and 3 months.

An installment of R750,00 per month.

  • From this amount should be deducted the administrator’s fees of 12,5% plus VAT (Effectively 14,375%). This will amount to R107,81 and leave R642,19 for distribution amongst creditors. As R693,75 of this amount will go towards interest this will mean that nothing will go towards the settlement of capital. This repayment plan will not work and should such an installment be ordered (which a court is entitled to do) John will be under administration forever.
  • A little extra clearly goes a long way in reducing the repayment period, whilst the wrong installment may cause you to be under administration forever.
  • It is important to note that there is another factor that needs to be taken into account in the aforesaid example and that is the situation where the debt included in the administration was already handed over to an attorney by your creditor. In such a situation there will be legal fees payable to your creditor’s attorney in respect of the collection of such debt in addition to the interest charges raised thereon. These fees could and normally do have a significant impact on the repayment period.

The main benefits of placing yourself under administration are the following:-

  • You are legally protected against creditors obtaining garnishee orders against your salary or having the sheriff attach and sell your movable assets.

  • You repay your creditors at an installment affordable to you and determined and fixed by an order of court.

An administration order also has its drawbacks, namely:-

  • The fact that you are under administration will be reflected on your credit record and have a negative impact on your credit score and your ability to make further loans. Once the administration debt is settled in full the fact that your are under administration will no longer be reflected on your credit record.

  • Being under administration and enjoying the aforesaid legal protection comes at a premium, being the legal fees payable by you to your administrator. This means that it is a more costly way to settle your debt than what would have been the case if you have paid your creditors directly.

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