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Important debt review ruling – Can court release consumer from debt review agreement?

LegalBrief reported yesterday that the Gauteng High Court (Johannesburg), in a judgment written by Judge Roland Sutherland, has confirmed similar rulings in the Western Cape, KZN and Limpopo divisions, that the High Court does not have jurisdiction to release consumers from debt review.

According to a Business Day report the judgment stems from an application by two consumers, both clients of the same debt counsellor, who wanted to be released from debt review because their financial positions had improved to the extent that they could pay their creditors according to the original terms of their credit agreements but could not pay off all of their debts in full.

It further states that where a court order has been made, the consumer is bound to debt review until he has paid all his debts as per the debt rearrangement order. In terms of the National Credit Act, the consumer must either pay off all debts in full, or pay off all short-term debts plus catch up on the arrears on home loan or any other long-term loans and revert to paying the original instalments. If the consumer’s financial situation improves while in debt review, nothing prevents him/her from paying extra to creditors in order to exit earlier than the terms stipulated in the debt review order. But if a consumer has not extinguished the over-indebtedness, he/she has no right to exit debt review, and ‘this seems to be a policy choice by the legislature’, the judgment says.

Click here to read the Business Day article.

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