Interaction between the National Credit Act 34 of 2005 and the Insolvency Act 24 of 1936

In terms of the National Credit Act 34 of 2005 (“the National Credit Act”), a consumer may apply to a debt counsellor to be declared over-indebted.

If the consumer qualifies for debt review, the debt counsellor will assist the consumer in obtaining lower interest rates with its creditors as well as restructuring the repayment of the consumer’s debts over a longer period to decrease the monthly amount payable.

Applying for debt review is an acknowledgment by the consumer that the consumer is unable to pay their debts as and when the amounts are due and payable, but applying for debt review cannot be regarding as an act of insolvency in terms of the Insolvency Act 24 of 1936 (“the Insolvency Act”). This is included in a new section 8A of the Insolvency Act and affords consumers protection so consumers can apply for debt review without fear of a creditor using the debt review application as a basis for applying for the sequestration of the consumer.