Debt review is a way of managing over-indebtedness by making an application to the court in terms of section 86 of the National Credit Act 34 of 2005 (hereinafter the NCA).

A debt counsellor has to consider the financial position of a consumer by the prescribed form, after which he/she may declare the consumer over-indebted. This is followed by an application made at court to place the consumer under debt review by means of a court order.

Such an order entails that the repayment instalments of the consumer’s debt to his/her creditors are restructured to be more affordable. Consequently, the repayment period is extended and settling said debt will take considerably longer. Creditors will not be able to sue the consumer after receipt of a notice of an application of debt review.

Debt review may have provided temporary relief, but its limitations can hinder your financial growth and overall well-being. As long as you remain under debt review, accessing new credit becomes a challenge, preventing you from obtaining essential resources such as home loans or vehicle financing. Furthermore, your credit score is likely to be affected, making it difficult to rebuild your financial reputation. These hurdles can significantly impact your quality of life and limit your options for the future.

Debt review removal is the key to regaining control of your financial future. By freeing yourself from the restrictions of debt review, you open doors to new opportunities for credit and financial growth.

The length of time it takes to be removed from debt review can vary depending on several factors, including your specific financial situation, the complexity of your debts, and the efficiency of the process. In general, the debt review period typically lasts for the duration of the repayment plan, which is usually between three to five years. However, the actual time it takes to remove the debt review status after completing the repayment plan can vary.

The legal collection process is as follows:

1. Letter of Demand: Failure by the debtor to respond to same within the time period provided is followed by a Summons.

2. Summons: A summons is issued out of court where the debtor resides, carries on business or is employed or where the cause of action arose. Once issued the summons is sent to the sheriff for service on the debtor.

3. Default Judgment: if the claim is not settled within the time period provided in the summons and we do not receive an Appearance to Defend we may apply for default judgment.

OR

4. Summary Judgment: When an Appearance to Defend is entered the creditor may file a notice in which he explains that there is no genuine defence to his claim and the Appearance to Defend is entered in order to delay the process. If granted, the action will not go to trial.

*The legal process may differ slightly in the Magistrates Court and the High Court

If the Summary Application is dismissed or the Defendant defends the action:

5. Pleadings: If the defence is accepted by the court, the matter will go to trial. The Defendant pleads detailing denial and admission of the particulars of claim and spelling out the facts upon which the defence is based.

6. Discovery: Both parties have the right to request documents (e.g.: invoices, delivery notes) in each other’s possession to prove or disprove a case.

7. Trial: Evidence is led from each side and the court is required to make a decision, either to give a judgment or dismiss the action.

If Judgement is granted:

8. Warrant/Writ of Execution: Once judgment is granted we need to enforce it. A warrant of execution is issued at court which allows the sheriff to attach movable property. The sheriff will then make an inventory that reflects the goods that are under attachment and valuation. The sheriff is then instructed to remove the attached goods and to arrange a sale in execution. In cases where the attached movable goods do not satisfy the debt a warrant of execution against immovable property Immovable property may be issued in order to sell the property.

6. Discovery: Both parties have the right to request documents (eg: invoices, delivery notes) in each other’s possession to prove or disprove a case.

7. Trial: Evidence is led from each side and the court is required to make a decision, either to give a judgment or dismiss the action.

9. Section 65 Proceedings: This is available in the Magistrates Court only. A notice is issued out of court which calls the debtor to give evidence under oath on his financial position and ability to pay the debt. The court may order: i) attachment of debt, ii) payment in instalments or Emoluments Attachment Order. If the debtor fails to appear in court a warrant of arrest may be authorised by the court.

10. Emoluments Attachment Order (EAO) OR Garnishee Order (GO): A GO allows the creditor to attach a portion of a debt owed by a third party. An EAO is a type of GO in terms of which the debtor’s income is attached and the debt paid in regular instalments from his salary or wage. Here the debtor’s employer will deduct a portion of the debtor’s salary and will pay same directly to the creditor towards the judgment debt.