The short answer
If you go into debt review, you will be protected by Section 88 while the debt review takes place.
The whole question
I am was in arrears of R44,000 and they wanted me to pay 75% of it but I could not afford to. I managed to pay R10,000, reducing the amount in arrears to R34,000. They rejected my offer to pay an extra R3,500 on my instalment. How can I prevent my house from being repossessed?
The long answer
Section 88 (3) of the National Credit Act prevents any legal action being taken against you by the creditor to allow you to go into the debt review or debt restructuring process. That protection against legal action by the creditor goes on until “the consumer defaults on any obligation in terms of a rearrangement agreed between the consumer and credit providers, or ordered by a court or the Tribunal.” If you default on payments under the rearrangement order, that Section 88 protection ends.
In other words, if you fall behind with paying the amount that the debt counsellor agreed with the creditor, the credit provider can issue a court summons for payment of the full balance of the loan without further notice.
It’s not clear from your email if you had already gone into debt review and your debt counsellor proposed the arrangement of an extra R3,500 on your monthly instalment that was rejected by the creditor, or if you proposed it yourself after you were unable to pay the amount the creditor was demanding.
If you haven’t yet gone into debt review, you should, so that you are protected by Section 88 while the debt review process takes place.
If you have breached your restructured debt payments under debt review and the creditor issues a court summons, the court must consider the circumstances of each case to decide whether it is right and fair to grant an order for the creditor to sell your house. The court must be satisfied that there is no reasonable alternative before granting an order.
The Constitutional Court has given the following guidance to the courts in making these decisions, which I will summarise below:
Are there other reasonable ways that a debt can be paid without the house having to be sold by the creditor? If there is no other way that the debt can be paid without the house being sold and the creditor has complied with all the rules, an order can be granted unless what the creditor gets from recovering the loan is “grossly disproportionate” to what the debtor gets from losing the house. In other words, if the money won’t make a very significant difference to the creditor, while the sale of the house will make the debtor and family completely homeless, the order is unlikely to be granted.
For that reason, the courts have to consider the amount of the debt, though the courts also have to uphold the social value of debtors repaying their debts.
The courts also have to consider the circumstances of the debt: if the debtor willingly put her house up as security for a loan, a sale in execution should normally be granted. This is because people should have the right to raise capital through their homes.
The Constitutional Court sums this up as follows:
In summing up, factors that a court might consider, but to which a court is not limited, are: The circumstances in which the debt was incurred; any attempts made by the debtor to pay off the debt; the financial situation of the parties; the amount of the debt; whether the debtor is employed or has a source of income to pay off the debt and any other factor relevant to the particular facts of the case before the court.
You can contact the National Credit Regulator to ask about debt review at 0860 627 627.
Wishing you the best,
Answered on Sept. 15, 2021, 5 p.m.
Please note. We are not lawyers or financial advisors. We do our best to make the answers accurate, but we cannot accept any legal liability if there are errors.