Administration vs. Liquidation – The Difference Between

The difference between administration and liquidation

In discussions about debt consolidation, two terms are commonly used – administration and liquidation. Administration is the legal process of determining how much and how often debts will be repaid to creditors. Liquidation is the process of selling off assets to satisfy debts. The sale is in the form of an auction where buyers bid on specific items or a complete package. A person whose assets are being liquidated will be assigned a manager by the court to look after the finances during the process.

Although this explanation is essentially the difference between administration and liquidation, the length of time for repaying the debts is much longer when an account has gone into administration. It is also possible that the court will not set a time limit for you to pay off your debts when you are in the process of liquidating your assets.

Liquidation is a very serious step to take because of the disastrous effect that it has on your credit rating. You will be blacklisted for about thirty years or until the court clears you as having repaid your debts. Until the court decides to do this you will not be able get approval for any credit or loan applications. It affects your entire family because your children may be included in the blacklisting as well. Recovery is the main idea behind both administration and liquidation, liquidation takes a lot longer.

When you need to take steps to consolidate your debts it is important to know the difference between administration and liquidation because it could be very costly to you and could affect you for the rest of your life. Generally liquidation is used when the debts are owed to unsecured creditors. It means that you sell your assets to obtain money to pay your debts.

Administration, on the other hand, means that someone will manage your accounts. This person will determine how much money you have each month to repay your debts and will make arrangements with creditors to accept a certain amount of money each month.