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Difference Between Administration and Liquidation

February 18, 2011 Posted by Aron

Administration vs Liquidation

Administration and Liquidation are two terms that are often used in the concept of debt consolidation. Both these terms are to be understood differently. Administration is a legal process where the reduction of the installments takes place and the creditors will be paid once in three months.

Liquidation is a legal process on the other hand where assets are sold in a bid to reduce the burden of the debt and the Court will also assign somebody to look after and manage your finances. This is one of the major differences between administration and liquidation.

It is important to note that the repayment period is much longer in the case of administration. On the other hand the Court may not direct you to deal with your finances or manage your finances in the case of liquidation.

Liquidation is a costly procedure in the sense that you will be blacklisted for about 30 years till the same court announces that you are perfectly rehabilitated. Blacklisting means that you are not entitled to get any more loans anywhere.

Liquidation not only affects you but it affects the other members of your family for example your son and others. Even your son would not be in a position to get loans due to the effect of the blacklisting done on you. This is why liquidation is considered costly.

Although recovery is the primary motive behind both these legal procedures, it is done for a longer period of time in the case of administration and quickly in the case of liquidation. This is another important difference between the two.

It is often dangerous if you do not know the difference between administration and liquidation. This is especially true if you are opting for debt consolidation. If you do not know the difference between the two, then you would be ending up by paying several dollars more than what you should have paid to your creditors.

It is important to know that liquidation of assets is done primarily for the benefit of the unsecured creditors. The term ‘liquidation’ should be understood in the right sense. It only means the process of a company in turning the assets into liquid money. Hence it is called liquidation.

On the other hand administration consists in someone managing your assets and money to pay off the creditors. Administration would only mean management. This is the main purport of the term ‘administration’.

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Filed Under: General Tagged With: administration, administration in debt condition, blacklisting, debt consolidation, liquidation, liquidation of assets, managing assets, mean management, recovery, repayment period, unsecured creditors

About the Author: Aron

Professor in Social Science and a contributing writer for Difference Between

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