Debt review, an administration order and sequestration are three different legal ways of dealing with debt in South Africa. The main differences are the amount and type of debt they cover, whether you need an income, what may happen to your assets and how you complete the process.
If the terms feel confusing, you are not alone. Here is a clear comparison to help you understand the options before speaking to a registered debt counsellor or attorney.
The short answer
Debt review is generally suited to an over-indebted consumer who has a regular income but cannot afford their current repayments. A registered debt counsellor helps restructure qualifying credit-agreement debt into a more manageable repayment plan.
An administration order is a Magistrates' Court process available when your total qualifying debt does not exceed R50,000. An administrator collects your payments and distributes the money among your creditors.
Sequestration is a High Court insolvency process. Control of your insolvent estate passes to a trustee and assets in the estate may be sold for the benefit of creditors.
There is no single best option for everyone. The right route depends on your income, expenses, types of debt, total debt and assets.
| Debt Review | Administration Order | Sequestration | |
|---|---|---|---|
| Main law | National Credit Act 34 of 2005 | Magistrates' Courts Act 32 of 1944 | Insolvency Act 24 of 1936 |
| Who it is generally for | An over-indebted consumer with enough income to follow a restructured payment plan | A debtor whose qualifying debts do not exceed R50,000 and who can make regular payments | A person whose estate is insolvent and whose sequestration will provide an advantage to creditors |
| Debt limit | No statutory rand limit | R50,000 in total | No statutory rand limit |
| Debt covered | Credit agreements governed by the National Credit Act | A broader range of debts may be included, subject to the Act and court order | Claims against the insolvent estate, subject to insolvency law and the ranking of creditors |
| Who oversees it | A registered debt counsellor, with a Magistrates' Court or National Consumer Tribunal process where applicable | The Magistrates' Court and an appointed administrator | The High Court, Master of the High Court and an appointed trustee |
| What happens to assets | You can generally keep assets if you maintain the required payments. Secured assets are still at risk if you default | The court may authorise specified assets to be sold, so keeping every asset is not guaranteed | Property in the insolvent estate generally vests in the trustee and may be sold |
| Can you take new credit? | No, while the restrictions under the National Credit Act apply | Access to credit is likely to be severely limited | Access to credit is restricted and insolvency must be disclosed where legally required |
| How it ends | A clearance certificate when the legal requirements are met | Payment of the debts or rescission of the court order | Rehabilitation by court order, or automatic rehabilitation after 10 years unless a court orders otherwise |
Debt review, also called debt counselling, is a formal process under the National Credit Act. It is designed for consumers who are over-indebted. In simple terms, this means you cannot meet all your credit repayments on time while still covering reasonable living expenses.
A registered debt counsellor assesses your income, living expenses and credit agreements. If you are found to be over-indebted, the debt counsellor proposes a repayment plan and may negotiate reduced monthly instalments and interest-rate concessions with your credit providers. The proposal must then be made legally binding through the appropriate court or tribunal process.
Debt review does not erase debt. You still repay what you owe under the restructured plan. It also does not usually cover debts that are not credit agreements under the National Credit Act, such as municipal accounts, tax debt or rent arrears.
No. While the National Credit Act's debt review restrictions apply, you may not enter into another credit agreement. This is intended to prevent your debt position from becoming worse while you repay what you owe.
Your debt counsellor can issue a clearance certificate once you meet the legal requirements. Depending on your circumstances, this generally means that all obligations under the included credit agreements have been settled, or that all debts other than a mortgage agreement have been settled and the mortgage is up to date.
The clearance certificate is then sent to the relevant credit providers and registered credit bureaus so that the debt review listing can be removed.
An administration order is a Magistrates' Court process under section 74 of the Magistrates' Courts Act. It is available when your total qualifying debt does not exceed R50,000 and you cannot pay those debts immediately.
If the court grants the order, it appoints an administrator and decides how much you must pay weekly, monthly or at another interval. The administrator collects the money, deducts permitted fees and expenses, and distributes the balance among your creditors.
An administration order can include debts that fall outside the National Credit Act, but the interaction between different types of debt can be complicated. Legal advice is sensible before applying.
Sequestration is the legal process used when a person's estate is insolvent. It is governed by the Insolvency Act and handled through the High Court.
You may apply for voluntary surrender of your estate, or a creditor may apply for your compulsory sequestration. In either case, a court must be satisfied that the legal requirements have been met. A central requirement is that sequestration must offer an advantage to creditors. There is no fixed percentage in the Insolvency Act that applies to every case.
Once a final sequestration order is granted, your insolvent estate vests in the Master and then in the appointed trustee. The trustee administers the estate and may sell assets so that the proceeds can be distributed according to insolvency law.
Not necessarily, but valuable assets that form part of the insolvent estate may be sold. The effect on a home, vehicle, household goods, income and jointly owned property depends on the facts and the law. Because the consequences are serious, you should obtain advice from an attorney who works in insolvency law before applying.
There is no universal five-year period. The timing of rehabilitation depends on your circumstances. According to the Master of the High Court, an insolvent person may be able to apply for rehabilitation after different periods, including six months, 12 months, three years or five years in specified situations. If there is no earlier court-ordered rehabilitation, a person is automatically rehabilitated after 10 years unless a court orders otherwise.
Use this as a starting point, not a final legal diagnosis:
The least frightening-sounding option is not automatically the right one. Start with your real income, essential expenses, debts and assets. That gives a qualified professional enough information to guide you properly.
No. Debt review is a National Credit Act process led by a registered debt counsellor and primarily covers qualifying credit agreements. Administration is a Magistrates' Court process for qualifying debts totalling no more than R50,000, managed by a court-appointed administrator.
It depends on your situation. Debt review has no statutory rand limit and may be more suitable when most of your debt comes from credit agreements. An administration order can include a broader range of debts, but it has a R50,000 limit and different costs, court requirements and risks.
No. Sequestration is not a faster version of debt review. It is a separate High Court insolvency process with serious consequences for your estate and assets. A court will grant sequestration only if the legal requirements, including an advantage to creditors, are met.
Not automatically. Debt review does not require your employer to deduct the repayment from your salary. You normally make the agreed payment through a registered payment distribution agency.
These are different statutory processes and are not designed to run as parallel repayment solutions. If you are already subject to one process, get advice from a registered debt counsellor or attorney before applying for another. The answer can depend on the orders already granted and the types of debt involved.
Debt review can protect included credit agreements from enforcement while the legal protections apply, but it is not unconditional. If you do not maintain the agreed repayments, secured assets can still be at risk. A credit agreement may also be excluded if enforcement had already progressed too far before you applied for debt review.
No. You are flagged at the credit bureaus while you are under debt review and cannot take further credit. Once you meet the legal requirements and a clearance certificate is issued, the debt review flag must be removed. Your credit score may still take time to rebuild because your broader payment history remains relevant.
Once the administration costs and listed creditors have been paid, the process can be concluded. An administration order may also be rescinded by the court in appropriate circumstances. Ask the administrator or an attorney what paperwork is needed to ensure the order and credit records are updated correctly.
You do not need to work out the law on your own. Meerkat's registered debt counselling team can look at your income, living expenses and credit agreements, explain whether debt review may help, and be honest if it is not the right fit.
Meerkat has been helping South Africans do more with their money since 2016. We offer debt review, funeral cover and flexible savings solutions, all designed to be simple, practical and judgment-free.
The Founder and CEO of Meerkat is registered with the National Credit Regulator as a debt counsellor, NCRDC2613.
This article provides general information, not legal advice. Debt relief and insolvency outcomes depend on the facts of each case. Confirm your position with an NCR-registered debt counsellor or an attorney with suitable experience before making a decision.