Can A Lawyer Ask a High Court to Declare You Not Over-indebted?

A recent High Court ruling has given clarity on whether the country’s High Courts can declare a consumer who entered debt review not over-indebted.

A Full Bench of judges was recently asked to rule on whether the High Court can declare someone no longer over-indebted. This is because there have been a number of contradictory rulings given across the country on the topic. Because there are hundreds of thousands of consumers who began but did not finish the debt review process who would once again like to make use of credit again but cannot.

Credit providers, who are approached by consumers for new credit, check with the credit bureaus to see if the consumer has other debts and how they repay them. If these credit providers see what is called a “debt review flag” they are quick to decline a consumers application (even if they can afford the debt). This is due to fear of being accused of giving out reckless lending.

When consumers enter debt review their Debt Counsellor informs the National Credit Regulator who in turn notify all credit bureaus that the consumer has applied for help with their debt. The credit bureaus then just leave that listing in place until a Debt Counsellor later proves to them that all the consumers’ debts are paid up.

What Does it Mean to be ‘Over-indebted’?

If you cannot pay all your necessary expenses at home (like food, electricity, insurance, transport) and pay all your creditors the amounts they require each month then you are over-indebted. Or at least you appear to be over-indebted. According to the recent Full Bench High Court ruling, only a court (or the National Consumer Tribunal) can actually declare that you are over-indebted.

If you are declared over-indebted then you are able to access debt relief by having your debts restructured by the courts. This can be done as a court sees fit or according to the proposal of a Debt Counsellor (or soon the National Credit Regulator).

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