Discharge principles applicable in South African Law: an analysis in light of international trends and guidelines.

Abstract

South Africa has three statutory debt relief mechanisms in place to assist over-indebted consumers. These include debt review in terms of the National Credit Act 34 of 2005, administration orders in terms of the Magistrates’ Courts Act 32 of 1944 and sequestration in terms of the Insolvency Act 24 of 1936. Of these three mechanisms, sequestration in terms of the Insolvency Act is the only mechanism in South Africa which provides for the statutory discharge of unpaid debts. However, the requirements to enter into this procedure are stringent and as a result many debtors do not have access to the procedure. It is therefore important to compare South Africa’s natural persons’ insolvency regime to international best practices and guidelines, to establish which discharge principles can be incorporated or adopted into South Africa’s insolvency regime. This paper will examine the effectiveness of the discharge principles in South Africa, in light of the World Bank Report on the Treatment of the Insolvency of Natural Persons and the discharge principles applicable in foreign jurisdictions. South Africa’s debt relief mechanisms will be compared to the United States of America, England and Wales, New Zealand, Ireland and Japan. The discharge principles applicable in these foreign jurisdictions will be highlighted in order to establish which practices South Africa can adopt into its insolvency regime, in order to better assist over-indebted consumers to obtain a fresh start and a better financial future.