Alternative measures for the discharge of debts for over-indebted persons under debt-related legislation in South Africa
Abstract
Debtors must be offered robust and comprehensive debt discharge measures. The
Insolvency Act is the primary legislation that provides over-indebted natural person
debtors with a formal statutory discharge of debts and the available debt-related
legislation does not provide for comprehensive discharge of debt or no discharge at
all. Over-indebted natural person debtors can make use of debt review in terms of the
National Credit Act or administration orders in terms of the Magistrates' Court Act to
circumvent the sequestration process. However, both debt review and administration
orders do not provide for a discharge of debt but provide for debt-restructuring only,
to eventually satisfy the creditor's claims. Moreover, debt intervention in terms of the
National Credit Amendment Act is sought to provide a discharge of debt to debtors
who are unable to meet the requirements of sequestration orders in terms of the
Insolvency Act. The issue facing over-indebted natural person debtors in South Africa
is not because there are no debt discharge measures available, but it is the fact that
existing debt discharge measures under the Insolvency Act are not robust and
comprehensive. Accordingly, many over-indebted natural person debtors are excluded
from obtaining debt discharge in terms of the Insolvency Act. Most of these excluded
over-indebted natural person debtors fall within the No Income and No Assets (NINA)
category. This study discusses problems faced by all over-indebted persons who
struggle to access adequate debt discharge in South Africa. Furthermore, the study
investigates how the debt-related legislation in South Africa limit the chances of overindebted
persons to obtain debt discharge. Consequently, the study proposes law
reform of the current debt discharge measures under Magistrates’ Courts Act, National
Credit Act, National Credit Amendment Act, Consumer Protection Act, Debt Collectors
Act, Prescription Act and Financial Sector Regulation Act in order to provide more
robust and comprehensive debt discharge measures for over-indebted persons.
Collections
- Law [826]