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    Silver Member Eugene's Avatar
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    DEBT REARRANGEMENT PROCESS

    (a) Voluntary Debt Rearrangement

    Although the primary function of a debt counsellor is to relieve over-indebtedness in terms of the debt review process (detailed in section 86), the Act allows the assistance of consumers who are not over-indebted but who are " ... nevertheless experiencing or likely to experience, difficulty satisfying all ... [their] obligations under credit agreements in a timely manner, the debt counsellor may recommend that the consumer and the respective credit providers voluntarily consider and agree on a plan of debt rearrangement" (section 86 (7)(b)). The debt counsellor uses discretion to decide whether a consumer meets the debt re-arrangement requirements. The Act does not prescribe an application procedure for this remedy. It appears that the decision must be made based on the application for over-indebtedness that does not meet the necessary criteria. There is, therefore, no separate debt rearrangement process. Again, the discretion of the debt counsellor in this situation must be exercised in an objective manner.

    Nature of a Voluntary debt rearrangement

    The plan of voluntary debt rearrangement is not defined. However, it does generally refer to a contractual arrangement that is concluded between the consumer and the creditors on how payments will be made. In this situation, the debt counsellor cannot impose any condition, but is permitted to facilitate the conclusion of the agreement, in writing and signed by the consumer, all creditors and the debt counsellor (Regulation 24(9)). The role of the debt counsellor in the plan is decided at the discretion of the creditors and the consumer. If the parties agree, they can extend the debt counsellor's functions to include:
    • collection of money from the debtor,
    • payment of living expenses of the debtor,
    • prioritising the payment of debts (which may be based on the duration of the debt)
    • Monitoring of payments.

    The Consent Order

    As already indicated, the terms of the rearrangement agreement cannot be prescribed, but only proposed by the debt counsellor. If the parties agree, the debt counsellor may redraft the agreement as a consent order (similar to a Tribunal or court order). He is required to apply in terms of section 138 of the Act with the Tribunal or a court where it will be confirmed as an order of the Tribunal or a court. It should be noted that this is purely an administrative function and no evidence is necessary to support the confirmation. The format of such application may still be prescribed by the Tribunal or the Court. It should also be noted that the Tribunal and a court cannot comment or interfere in the agreement.

    (b) Involuntary Debt Rearrangement

    A debt rearrangement can become involuntary. This happens when the parties are unable to agree on a voluntary arrangement. In this situation, the debt counsellor makes a recommendation to the Magistrates' Court in terms of section 86(8) (b). The Magistrates' Court will have discretion in this matter.

    There is no separate application for debt rearrangement. This matter is determined at the discretion of the debt counsellor. Any consumer encountering difficulty in paying debt should use the over-indebtedness process described below.

    On receipt of the application the debt counsellor will inform all creditors that are listed in the consumer's application and every registered credit bureau, that an application has been submitted by the consumer to be declared over-indebted. The debt rearrangement will be finalised depending on whether it is voluntary or involuntary. The voluntary debt rearrangement is finalised and regulated in terms of the agreement. The consequences of an involuntary debt rearrangement in terms of a court order will depend on the decision of the Magistrates' Court.

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