A judge has questioned whether voluntary surrender applications brought by people in debt are becoming an “industry” which could undermine the credit system.
Durban Acting Judge Peter Olsen made the comments recently when four voluntary surrender applications, all filed by one law firm, came before him.
The applications were adjourned to later this month.
Sequestration applications are brought by debtors and the court has to be satisfied that the voluntary surrender of the estates are favourable to their creditors.
Judge Olsen said that while it was not wrong to bring the applications, a clear case had to be made out by the debtors.
“It is an industry, that is what is going on. It is the same as the social welfare grant cases. All these applications are prepared by rote and are designed to undermine our credit system.”
He said the court could not make a decision if the debtors did not provide proper affidavits.
“I am not saying do not use voluntary surrender, but, if it is used in these sorts of cases, there has to be a clear case. We need full explanations.”
Judge Olsen also ordered that his comments on the cases be brought to the attention of the judge who would hear the matters on the next date.
Debt Counsellors’ Association of SA president Paul Slot said Judge Olsen’s comments were fair as the applications should be used as a last resort.
“The court has to be satisfied that these people have exhausted all other avenues and this is the last option.
“They would have to prove that they had gone for debt counselling and taken other steps before they approached the court.
“A judgment in Gauteng has said that there must be a prima facie case made out by the debtors, which includes that there is an advantage to the creditors.”
He said creditors also lost out when these applications were granted.
“The creditors are left out of the situation and often end up with very little once the estate is sequestrated and assets are sold, as the people involved in the processes have to be paid as well.”
Judge Olsen said there were several consumers “in trouble”, as there had been a slight increase in voluntary surrender applications.
“Some consumers who are heavily in debt may view it as an easy way out because, once you are sequestrated, you walk away from the debt.
“But it is not something that should be taken lightly; after sequestration, there is a 10-year period before a person can apply for credit again, or they can approach the court after four years to get an order to allow them to apply for credit.
“It would also be on the credit bureau’s record that the person was once sequestrated.”
