The effectiveness of debt review in terms of the National Credit Act 34 of 2005 as a debt relief measure for over-indebted consumers

Abstract

The South African personal insolvency system needs reform to accommodate all categories of debtors who find themselves over-indebted and unable to re-establish themselves economically. Presently there are three statutory debt relief measures for an over-indebted consumer to utilise. Sequestration in terms of the Insolvency Act, administration in terms of the Magistrates’ Courts Act, and debt review in terms of the National Credit Act. All these measures require disposable assets or disposable income which creates an access barrier for no-income-no-asset (“NINA”) and low-income-low-asset (“LILA”) debtors. The National Credit Act came into effect on 1 June 2007 and one of the Act’s main objectives is to “provide for debt re-organisation in cases of over-indebtedness.” Part D of Chapter 4 (sections 85-88, as amended in terms of the National Credit Amendment Act 19 of 2014) introduces remedies for alleviating debt burdens, notably incorporating sections 85 and 86, which introduced the debt review procedure. However, the existing procedure falls short of effectiveness, lacking a debt discharge and imposing indefinite time constraints. In response to this inadequacy, the National Credit Amendment Act 7 of 2019 introduced debt intervention as an alternative debt relief measure to the debt review process in terms of the original Act. This mini-dissertation aims to investigate whether debt review as an alternative to the sequestration procedure genuinely offers effective debt alleviation for diverse categories of debtors. The dissertation emphasises the need for a more comprehensive natural person insolvency system in South Africa, addressing challenges specific to debtor-groups such as NINA and LILA debtors. While debt intervention is yet to be implemented it deserves commendation as a positive step in the right direction.