Twitter News: Terminating Debt Reviews

TERMINATING DEBT REVIEWS: CREDITORS, DEBTORS AND DEBT COUNSELLORS TAKE NOTE!

Once an "over-indebted" debtor has applied for debt relief in terms of the NCA (National Credit Act), all recovery proceedings are suspended whilst a debt counsellor formulates a repayment plan for approval by either creditors or the court.

The consequent delays have caused much unhappiness in the ranks of creditors when debtors abuse the process solely to avoid or delay payment. But there is a practical solution - where the debtor is in default, you can, 60 business days after the initial application, give notice of termination of the debt relief process. Serve notice on the debtor, the debt counsellor and the National Credit Regulator.

However, an important new restriction to this termination procedure has emerged from a decision in the South Gauteng High Court, namely that such notice of termination cannot be given after the debt counsellor has referred the process to a Magistrate’s Court. This applies even if the debtor has again defaulted on payment, and renders unlawful the (apparently common) practice of terminating debt reviews, whether or not referral has taken place, purely on the ground of continued default. (Note that there is a contrary decision in the Eastern Cape High Court, so there will doubtless be further developments in this field - take advice in doubt!)

Critically, the actual "referral" to the Magistrate's Court occurs only when it has been properly served on the creditor; it has then been "brought before the court", and the debt review process must continue in that court.