08 Apr Can You Get Out of Debt Review After an NCT Order?

Posted at 08:00h in Latest News by

Is it possible to get out of debt review after a National Court Tribunal (NCT) order? The answer is no. According to case law and section 138 of the NCA, you can’t withdraw from debt review once any court order has been made.

Many debt review removal companies claim they can remove NCT court orders, but this is false. No debt review removal company can remove a National Court Tribunal/consent order. They also can’t remove a Magistrate’s court order, unless under specific circumstances.

This post discusses the circumstances under which you can exit debt review, why you can’t have an NCT order rescinded, relevant case law, and how Cape Town Legal Consultants can assist you. We’re one of the best debt review removal companies.

What’s an NCT Order?

NCT orders are consent orders. They’re granted after a dispute during the debt review process, such as a consumer arguing that they’re no longer over-indebted and should be released from debt review. If the consumer wants to contest the Magistrate court’s decision, they can apply to the NCT or NCR to contest the decision. If the NCT agrees with the Magistrate’s court, they’ll issue a consent order.

The NCT may grant a consent order if the National Credit Regulator (NCR) has investigated a matter and the NCR and the respondent (creditors) agree to the proposed terms of an appropriate order.

Where Does the Magistrate’s Court Fit into This?

Usually, debt rearrangement plans are submitted to the Magistrate’s court. This is done per the terms of section 86(7)(c) of the National Credit Act (NCA).

If a debt counsellor recommends a voluntary repayment agreement and all parties (you and your creditors) agree, your debt counsellor must refer the consent order to the Magistrate Court with a recommendation for approval.

If you disagree with the Magistrate’s court, you or your attorney can apply to the NCR or ombudsman for an investigation. After a verdict is reached, it’s submitted to the NCT. The NCT has the power to issue a consent order.

What Does the Law Say About Applying for the Rescission of an NCT Order?

There is no explicit explanation of how applying for rescission after a consent/NCT order works during debt review. All of the relevant information is from case law.

In South Africa, when something isn’t explicitly written into law, judges and lawmakers use past cases and purposes of Acts to infer what decisions they should make.

Case Law: MB Sithole v B Sager and Others

In this case, MB Sithole (applicant) wanted his NCT consent order (his case was submitted to NCT instead of the Magistrate’s Court) rescinded. At first, the NCT dismissed his case, but then he applied for a hearing.

He agreed to the NCT restructuring his debt – or rather, his debt counsellor did, having been given power of attorney. His attorney told him that the NCT didn’t actually have the power to grant the debt review order (debt restructuring agreement), that the Magistrate’s court should have.

The applicant argued that since he was over-indebted, he didn’t have the capacity (locus standi) to stand in court. He argued that since the order was granted in his absence – and so wrongly – it should have been rescinded. His creditors opposed him and said the applicant only wanted to exit debt review because he didn’t want to pay his arrears and that he had benefitted from his debts being cut in half.

The NCT convened and reached a verdict: the applicant was right, they didn’t have the power to grant the order; however, that meant they also didn’t have the power to rescind the order. This was also the case in previous case law, which they used to decide.

This set a precedent that the NCT doesn’t have the power to rescind debt review orders. Only the Magistrate’s court can do that (under specific circumstances), as this is where debt review agreements should be filed.

The rescission wasn’t granted. Instead, the applicant was issued a consent order and had to remain under debt review.

What Does Case Law Say About Exiting Debt Review under the Magistrate’s Court?

You can’t exit debt review after an NCT order, but you can under a Magistrate’s court order process. There are only some circumstances that you can do this under, including:

  • Before your debt restructuring order is granted
  • By fulfilling all obligations under every credit agreement that was subject to the debt re-arrangement order and then being issued a clearance certificate by a debt counsellor
  • If you’re sequestrated (declared bankrupt)
  • If the National Credit Regulator (NCR) finds that the debt review application was not correctly followed

Our attorneys can help you navigate these circumstances and exit debt review.

Before Your Debt Restructuring Order Is Granted

If the Magistrate’s court hasn’t granted the restructuring order yet, you can present additional facts to the court, along with the debt counsellor’s proposal, to argue against their initial determination of over-indebtedness. You have to be able to show the court that you’re not over-indebted and can meet your original credit obligations. If the court finds you not over-indebted, debt review ends.

Your debt counsellor must update the Debt Help System (DHS) to reflect that you’re no longer over-indebted and send a Form 17 W(c) to credit providers with the court order.

Fulfilled Obligations under the Debt Review Agreement

If you’ve paid off all debts (except long-term debts like a bond), you can apply for a clearance certificate (Form 19). Once the Magistrate’s court has declared you over-indebted, no court can declare you no longer over-indebted under debt review removal legislation.

You’re Sequestrated

Sequestration is when you’re declared bankrupt voluntarily or involuntarily. This can happen if you’re unable to make debt review payments. In this case, your assets will be repossessed (so long as they cover at least 20% of your debts).

If you’re sequestrated or your trust is liquidated while under debt review, the debt review process ends. The NCR must be requested in writing to update the DHS with Status J and proof of the sequestration order.

Note that this is most likely the least desirable option, as you’ll lose all your assets.

The Debt Review Application Wasn’t Filed Correctly

If the National Credit Regulator (NCR) finds that the debt review application wasn’t correctly filed, it will be deemed that you didn’t apply for debt review. You’ll be able to withdraw from debt review.

Want to Exit Debt Review?

You can’t exit debt review after an NCT order. Once any order – Magistrate’s or NCT – has been granted, they can’t rescind it – at least in the context of debt review.

The only way to exit debt review is before a debt rearrangement order is made by the Magistrate’s court, your accounts are no longer in arrears (except for your bond), you’re sequestrated, or your application wasn’t correctly filed by your debt counsellor

The only way to exit debt review is before a debt rearrangement order is made by the Magistrate’s court, your accounts are no longer in arrears (except for your bond), you’re sequestrated, or your application wasn’t correctly filed by your debt counsellor.

If you would like a qualified, experienced attorney’s help in exiting debt review, contact Cape Town Legal Consultants. We’ll assess your situation and determine whether you have grounds to apply for debt review withdrawal. Together, we’ll work to help you reach financial freedom.