Legal Debt Relief Options

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Debt Relief Options in South Africa

Let’s talk about the truth behind your options — not the marketing.

If you are drowning in debt, you have probably heard a dozen different opinions.

Some sound too good to be true.

Others are wrapped in legal jargon.

And most of them leave you feeling more confused than empowered.

You have options. Let us talk through them.
No pressure. No confusion. Just facts and a plan.

Here is the real story.

There Are Only 3 Legal Debt Relief Processes in South Africa

These are the only 3 solutions backed by law, with legal protection for you as the consumer.

1) Sequestration (Voluntary Surrender of Your Estate)

A legal process to write off your debt and start fresh.

Sequestration is the only legal process in South Africa that allows for the permanent debt write-off.

It applies when your liabilities significantly exceed your assets, and there is no realistic way to repay what you owe.

Benefits:

  • Your debt is written off (not restructured).
  • Creditors can’t pursue you — all legal action stops.
  • Your income becomes yours again — no monthly payments to creditors.
  • It offers a full financial reset through a legal High Court process.

Limitations:

  • You may lose assets such as your bonded property and financed vehicle.
  • You cannot access credit or be a company director until you are rehabilitated.
  • You lose your financial and legal identity (your “name”), meaning you cannot open accounts or own assets until rehabilitation.
  • Not everyone qualifies — certain assets, income, or debt thresholds apply.

Sequestration is a powerful, structured solution for people who have no way of repaying their debts and need a clean, legal break to rebuild their finances.

2) Debt Counselling

A structured repayment plan under the National Credit Act.

Debt counselling is a legal process designed to help over-indebted consumers restructure their debt payments through a registered Debt Counsellor.

Benefits:

  • You are legally protected from further legal action by creditors (once a court order is in place).
  • One reduced monthly payment is made to cover all your creditors.
  • Interest and fees may be reduced or frozen, depending on creditor agreements.
  • You get time to breathe while repaying your debt.

Limitations:

  • You must repay all your debt — this is not a write-off.
  • The process can take up to 5 years or more.
  • You pay a monthly management fee to the Debt Counsellor and the Payment Distribution Agent (PDA).
  • Creditors can reject the proposal in the early stages.
  • Many people never exit the process due to poor affordability or lack of follow-through.

Debt Counselling is best suited for people who still have regular income and want to repay what they owe over time, but need structure and protection.

3) Administration Order

A court-managed repayment option for smaller debts (under R50,000).

A Magistrate’s Court grants an Administration Order, which appoints an Administrator to distribute a portion of your salary to creditors.

It is generally viewed as an outdated or “last resort” option for small debt amounts.

Benefits:

  • Legal protection from creditors.
  • Simplifies repayments into one monthly amount.
  • Suitable for low-income earners with relatively small debt loads.

Limitations:

  • Applies only to debts under R50,000.
  • Interest continues to accumulate unless stopped by the court.
  • It can take many years to complete.
  • You must pay an Administrator’s fee from your monthly installment.

It is a basic, last-resort solution for low-income individuals with modest debts, not a full financial reset.

Still stuck in the debt spiral? Let’s fix it.

Comparison table for Sequestration vs. Debt Counselling vs. Administration

Feature / Process

Sequestration

Debt Counseling

Administration

Payment for the process

A percentage of the total outstanding debt is payable for the Application. The amount is determined by the amount of debt you have. Currently, this is calculated at 25 cents to every rand owing – it does not accrue interest, and you have 12 to 18 months to make the payments.

You pay the entire outstanding debt amount plus interest and costs. The Debt Counsellor may negotiate lower interest rates and an extended period. However, according to the National Credit Act (NCA), the period for unsecured debt is limited to 5 years.

You pay the entire outstanding debt amount plus interest and costs. The Administrator may negotiate an extended period.

Monthly Payments

You pay the money directly into a Trust Account held by the Attorney or the curator/trustee.

Monies are collected by a distributing agent (PDA), who distributes the funds to the creditors.

Your employer must give permission for the repayment amount to be deducted from your salary.

Immovable Assets

If you have an immovable asset (e.g., a house or vehicle). The curator/trustee will sell the assets to pay your creditors.

Should you have an immovable asset (house or vehicle), you may keep the asset if the bank accepts the minimum payment and legal action has not yet been taken.

Should you have immovable assets, you must still pay the premiums and be able to keep the house or vehicle.

Movable Assets

Movable assets, acting as collateral, are included in the insolvent estate. An agreement with the curator/trustee guarantees that the assets will not be removed.

Movable assets do not form part of the process.

Movable assets do not form part of the process.

Legal Protection

The Application is brought to the High Court of South Africa. According to the Insolvency Act

The Application is made in the Magistrate Court.  According to the National Credit Act.

The Application is made in the Magistrate Court. According to the Magistrates’ Courts Act 32 of 1944, specifically Section 74.

Exclusions to the process

According to the Insolvency Act, every creditor is included, and all creditors must accept the court order.

Debt that has already been handed over to attorneys for legal action is excluded from a Debt Counselling Application.

“Cash loan” agreements are excluded from the Administration, and you still have to pay the outstanding amount.

Debt Limit

There is no maximum limit to debt for the Application to be lodged

There is no maximum limit to debt for the Application to be lodged.

The maximum debt for Administration is R50,000.00.

Access to Credit

No further debt can be incurred while sequestrated.

No further debt can be incurred while under Debt Counselling.

No further debt can be incurred while under Administration.

Drawbacks

Loss of name & assets, access limits.

Long-term, ongoing payments & fees.

Very slow progress. Fees still apply.

Main Advantage

Full reset – no more debt.

Repayment plan with protection.

Simplified payments and legal cover.

Informal & “Evolved” Debt Solutions — High Risk, With No Guarantees

Let us call them what they are: risky workarounds with no legal protection.

These include:

  • Letters from your attorney friend to the creditors or banks.
  • Debt mediation schemes.
  • Making verbal or casual payment arrangements.
  • Ignoring the debt altogether.
  • Trying to argue reckless lending or the prescription act without legal backup.

These might buy you time — but you are still exposed to salary garnishes, repossession, court orders, and emotional devastation.

The Bottom Line:

There are only 3 Debt Relief processes that are legal in South Africa.

Only ONE of the legal processes actually writes off your debt.

If you are serious about getting out of the cycle, do your research.

Know your rights.

And most importantly, choose the solution that gives you an ending, not just another monthly deduction.

Not all debt relief is created equal.
Let’s cut through the sales talk and figure out what actually works for you, not the industry.