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Loaded legal, collection fees

Jul 23 2012 12:49

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A Fin24 user writes:

A while back I lost my job and could no longer afford to pay off my debts which were quite substantial, so I opted to go under administration.

However, I'm not sure I fully understand how administration works. All I was told by the company that helped me apply for the administration order is that this would mean creditors would not be hounding me directly to demand payment.
 
I would like to purchase a house at some point. How would this affect my chances of being granted credit when I do need to buy property?

Clark Gardner, CEO of Summit Financial Partners, responds:

Making use of administration orders (S74 of the Magistrates' Court Act) as a debt relief mechanism is extremely dangerous.

As a function of court, the protection offered is a court order which also results in a debt judgment. Therefore if you want recourse from being over-charged (by both administrators and creditors alike), you need to return to court for assistance.

However, this is an expensive process.

Further, administrators typically load legal fees and collection fees excessively and it is difficult to challenge.

Regarding your need to apply for a mortgage, this will be prejudiced by the fact that you have an administration order which takes the effect of a debt judgment and will be listed on your credit record.

I would suggest you approach the same court where the order was granted and request to be removed from being under administration.

You would need the administrator to assist but if you voluntarily entered the process you can exit accordingly. If you have settled this debt already then this step is not required.

Thereafter, apply to the court to rescind the judgment which in turn will remove your record from the credit bureaus.

The challenge will be with the creditors and administrators over-charging on this debt. We would gladly audit their statements to ensure fair play.

 - Fin24

*Do you have a pressing financial question? Post it on our Money Clinic section and we will get an expert to answer your query.

*For more on this and other Fin24 stories, visit our Facebook, Twitter and Google+.


 
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