18 Jan What Exactly Is Prescribed Debt?

What exactly is prescribed debt, and how does it work in South Africa in 2024? How do you know if your debt has been prescribed, and how long does it take? Does prescribed debt affect your credit score? Get the answers to all of these questions and more in this Cape Town Legal Consultants article about how prescribed debt works.

What Is Prescribed Debt?

In South Africa, prescribed or prescription debt refers to debt that creditors can’t harass or take legal action against you for because the time taken is too long to legally continue to enforce the debt. Note that the prescription does not write off debt, as it remains on your record for 2 years from the date of prescription, but it does take away creditors’ rights to take legal action against you to enforce the debt. 

What Is Prescription?

As stated in Prescription Act 68 of 1966, prescription means that a person becomes the owner of something by possessing it openly. After some time, that person becomes the owner of that thing by prescription. Hence, prescribed debt. Also, as written in the National Credit Act 34 of 2005 (NCA)

How Is Debt Prescribed?

Debt isn’t actively prescribed–it is more a passive consequence of inaction from debtors and creditors within a particular timeframe.

Let’s look at the process of how debt becomes prescribed.

1. Debt accrues: an amount isn’t paid according to agreed-upon terms and due date.
2. Period of non-acknowledgement from the side of the creditor: the specific timeframe and definition of creditor inaction isn’t explicitly outlined in any particular legislation, but rather established through a combination of provisions across Act 68 of 1966 and Act 34 of 2005. Section 12 (1) says that after a relevant period (usually 3 years or as stated in other legislation) has elapsed, debt is prescribed or as soon as the debt is due, as seen in (2) of the same section.
   The creditor has to not have taken any action to acknowledge the debt, such as initiating legal proceedings or payment demands. After inactivity during a prescribed period, the debt becomes legally unenforceable, as stated in Section 12B in the NCA Act 34 of 2005.
3. Debtor raises the issue of prescription: Act 68 of 2005 reads that a court will not raise the issue of prescription without the debtor pleading prescription as a defence against a creditor’s claim.
4. The prescription effect takes place: After a specified time has elapsed, the debt becomes unenforceable by the creditor.

How Much Time Has To Pass Before Debt Is Prescribed?

Usually, about 3 years. However, there are a few exceptions, including:

• Debts arising from the court have longer periods.
• Mortgage payments have prescription payment periods, of up to 30 years.
• You can interrupt the inactivity period by making a debt payment to the creditor, acknowledging the debt in writing, or entering into a new agreement with the creditor. This adds another 3 years to the clock.

Does Prescribed Debt Affect Your Credit Score?

Prescribed debt remains on your credit score for two years after its prescription, after which it is removed from your credit score to ensure fairness and accuracy. This has a much better impact on your credit score than non-prescribed debt. Also, consider that the older the prescribed debt becomes, the less prominent it stands on your credit record, however, lenders may still take this debt into account, despite it being legally unenforceable, according to the Consumer Protection Act.

If you would like to dispute prescribed debt, or if your debt has been prescribed against your will, don’t hesitate to get in touch with our Cape Town Legal Consultants now for an industry-leading legal council.