A case was heard in a Gauteng high court to provide clarity on when and how an individual under debt review could apply to exit. The court has ruled based on the current legislation under the National Credit Act (NCA). There were two applicants with different circumstances.
Hermanus Janse van Vuuren was put under debt review in 2015 and a court order was issued by the magistrates’ court. Subsequently, Janse van Vuuren’s financial position improved.
Although he has not settled all his debts as per the court order and section 71 of the NCA, and he believes he is now able to meet his original credit agreements and no longer requires debt review.
Fabrian Nel applied for debt review in 2016. His application was accepted by the debt counsellor who reviewed his financial position and agreed that he was over-indebted.
His creditors and the credit bureaus were notified of the application and the matter was filed at the magistrates’ court. However, the court hearing had not occurred and no order was made by the magistrate.
While waiting for the magistrates’ court application Nel paid his creditors based on his debt counsellor’s proposal and enjoyed the legal protection of the NCA.
Then in 2017, Nel withdrew his payments under the proposal and resumed his original agreements with his creditors.
Whether one can withdraw from debt review or not depended on whether the magistrates’ court had found the consumer over-indebted
Like Janse van Vuuren, Nel wanted to be released from debt review.
The court ruled that based on the NCA, whether one can withdraw from debt review or not depended on whether the magistrates’ court had found the consumer over-indebted.
The understanding of the judge was that a debt counsellor could make recommendations, but only a magistrate could declare the individual over-indebted. While the application was pending in the magistrates’ court the consumers enjoyed legal protection in terms of the NCA.
The court argued that, in Nel’s case, as his application for a court order was still to be heard, he could use the new information before the magistrate to argue that he was no longer over-indebted as he had resumed his original payments with his creditors.
It would be up to the magistrate to deem whether or not Nel was over-indebted.
However, the notification to the creditors and credit bureau could only be removed once the case was heard in the magistrates’ court.
In this case, Nel would need to present evidence that he was no longer over-indebted and that all the contractual arrears payments were up to date to prevent legal action from credit providers if he was declared no longer over-indebted.
In the case of Janse van Vuuren, the court ruled that the NCA was very clear in that only once his debt obligations under the court order were met in full, could he exit debt review.
In other words, his debts would need to be fully paid, apart from his mortgage.
Irrespective of whether or not Janse van Vuuren was in an improved financial position, he could not exit debt review.
Guidelines to exiting debt review
- If form 17.2 has been issued, but you have not yet received a court order, you will still need to go before the magistrates’ court and demonstrate that you are no longer in need of debt review.
- If you have received a court order, you will have to fully settle your debts under debt review, excluding your mortgage, and receive a clearance certificate from your debt counsellor.
Nothing prevents you from increasing payments to expedite repayment of the debt. In these cases, the consumer would continue agreed reduction in interest rates and fees.