The National Credit Act 34 of 2005 (“the Act”) allows for over-indebted consumers to apply for ‘debt review’ with the assistance of a debt counsellor.
The Act’s debt review procedure empowers magistrate’s courts to, among others, declare certain credit agreements ‘reckless’, or to rearrange the consumer’s obligations under qualifying credit agreements in an attempt to alleviate the consumer’s financial strain.
One of the pertinent side effects of a successful debt review application is that the debt review order is registered against the consumer’s credit profile, and the consumer is not permitted to enter into any further credit agreements for the duration of the debt review order.
Naturally, the Act uses this mechanism to protect consumers from engaging in behaviour that will perpetuate their already difficult financial position.
The question, however, is what happens after the consumer’s financial position is rehabilitated and the consumer is no longer over indebted? Can a consumer exit from debt review and have the debt review order removed from their name?
Currently, the law does not make provisions for a person to simply ‘exit’ under debt review once their financial position has improved.
Until recently, there was a school of thought suggesting that the High Court has discretion to rescind a debt review order when a consumer’s financial position improved to the extent that the consumer is no longer over indebted.
The full bench of the Johannesburg High Court in the matter of Van Vuuren v Roets and Others (37407/2018) [2019] ZAGPJHC 286 (3 September 2019) set the record straight by confirming that a debt review order can only be rescinded in terms of the provisions of section 71 of the Act.
In terms of section 71, a debt counsellor can issue a consumer with a clearance certificate if the consumer has satisfied all the obligations under every credit agreement in accordance with the debt review order.
Where the consumer is a party to a mortgage bond or long-term credit agreement, the consumer must satisfy all the obligations under every other credit agreement, must satisfy all arrears under the mortgage bond or long-term agreement, and must demonstrate financial ability to satisfy the future obligations under the mortgage bond or long-term credit agreement before a clearance certificate can be issued.
Article by Coenie Bezuidenhout, candidate attorney at Lagarto Inc. For more information on debt review phone them on 011 568 9326 or send an email to coenie@lagartoinc.co.za
