Abstract:
In a recent case, the question arose as to whether the applicant in an
application for the voluntary surrender of his or her estate may forfeit
his or her salary with a view to establishing the requirement of advantage
for creditors as envisaged by the Insolvency Act. Such forfeiture is
impermissible, for example, because of the constitutional challenges that
may arise should the insolvent in future require the forfeited amount for
his or her basic needs. However, to exclude debtors from a debt relief
measure because they do not have sufficient assets to prove advantage,
may also be unconstitutional. It is argued in this article that the current
system must be reviewed in order to afford these debtors relief in terms
of an alternative discharge procedure.
A comparative investigation into the manner in which certain foreign
consumer insolvency systems deal with income contributions indicates
that the Act does not regulate this issue fairly or adequately. However,
income contributions as part of the sequestration process are not truly
appropriate and it is submitted that the American approach, which provides for an exclusively asset-liquidation procedure and a separate
income-restructuring procedure should be followed. It is concluded that
an unconditional exclusion of an insolvent’s income from his or her
insolvent estate could provide a mechanism through which the insolvent
could be assisted to rebuild a new estate and eventually return to
economic productivity.
