Measures implemented in foreign jurisdictions to cater for homestead exemptions in insolvency proceedings

Abstract

The right to access to housing found in section 26 of the Constitution of South Africa, 1996, has been infringed upon by the Insolvency law framework. This infringement was challenged in 2005 where the constitutional court ruled that there had been a limitation on the protection of the debtor’s rights to housing. Debtors were found to be at risk of losing their homes as their homes were used to ensure creditor recovery. The court ruled that there needed to be a balance of interests for both debtor and creditor with guidelines to be established for selling the homestead. The insolvency law framework has not established an alternative measure for debtors to access debt relief without losing the family home. The courts have not taken into account all the financial circumstances of vulnerable debtors and what effect the sale of execution or sequestration will have on this right to access to adequate housing. This dissertation will focus on the protection of the family homestead during sequestration. It will examine the role the Constitution and Insolvency play in debt relief and how they intersect with one another. The need for a balanced approach that considers both creditor and debtor rights will be highlighted and to show how the current insolvency law framework provides inadequacies that have led to this imbalance. The overreaching research problem is that the current framework disproportionately favours creditors, often at the expense of debtor dignity and rehabilitation. The study will investigate other South African debt relief measures; the consequences of not having a homestead exemption and the link between the National Credit Act and the Insolvency Act, and the lessons South Africa can draw from jurisdictions that have successfully protected family homes in insolvency proceedings. A comparative analysis is conducted. The aim is to consider foreign mechanisms that has either successfully or partially protected the family home in insolvency proceedings. The international jurisdictions considered are Canada and New Zealand, who demonstrate that the protection of the family home is essential for humanity and an effective credit recovery system.In order to provide valuable insights for improving debtor protection under South African law, the comparative analysis will assist to identify balanced strategies and purpose recommendations for enhancing homestead protections in South Africa.