Understanding your legal debt relief options in South Africa
Let us talk about the truth behind your options and not the marketing.
If you are overwhelmed by debt, you have likely encountered a multitude of differing viewpoints.
Some sound too good to be true.
Others are wrapped in legal jargon.
And most of them leave you feeling more confused than empowered.
Here is the truth about your legal debt options in South Africa.
When Debt Feels Out of Control, There Are Only Three Legal Options
There are only 3 legal debt relief processes in South Africa.
- Personal Sequestration
- Debt Counselling
- Administration
Each legal process exists to protect you, as a consumer, and creditors.
These are not shortcuts or informal agreements.
They are strictly regulated legal procedures under the High Court or the National Credit Act.
Their purpose is simple: to stop creditor pressure, give you legal protection, and create a structured path out of debt you can no longer manage.
Understanding these 3 legal options is the foundation for choosing a solution that is safe, lawful, and aligned with your financial situation.
1. Sequestration (Voluntary Surrender of Your Estate)
Personal Sequestration is a High Court process governed by the Insolvency Act 24 of 1936.
It is the only legal option in South Africa that can permanently write off your debt.
This legal process exists for people whose liabilities exceed their assets and who have no realistic way to repay what they owe.
The Benefits and Limitations of Personal Sequestration below give you a clear understanding of what this legal process offers.
Benefits:
- Your debt is written off (NOT restructured).
- Creditors can’t pursue you.
- All legal action stops after the High Court Order is issued.
- Your income becomes yours again.
- No monthly payments to creditors.
- The legal process offers a full financial reset through a High Court Order.
Limitations:
- You will lose your assets such as your bonded property and financed vehicle.
- You cannot access credit while Sequestrated.
- You can not be a company director until you are rehabilitated.
- You lose your financial and legal identity meaning you cannot open accounts or own assets until rehabilitation.
- Not everyone qualifies.
- Certain assets, income, and debt thresholds apply.
2. Debt Counseling / Review
Debt Counselling, also known as Debt Review, is a legal process regulated by the National Credit Act (NCA).
It is designed for consumers who are over-indebted but still earning an income and able to repay their debt with the right structure.
Under this legal process, a registered Debt Counsellor restructures your credit agreements into one affordable monthly repayment and obtains a court order to protect you from legal action and repossession.
Understanding your affordability and long-term goals is key to deciding whether Debt Counselling is the right path for you.
The Benefits and Limitations of Debt Counselling are explained below, explaining how this legal process works and who it is best suited for.
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, 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.
3. Administration Order
Ursula Gouws Consulting does not specialize in this legal process.
Administration is a Magistrates’ Court process governed by Section 74 of the Magistrates’ Courts Act 32 of 1944.
It is designed for consumers with small debts (under R80,000) who still need legal protection from creditors but cannot afford larger restructuring options.
Under this legal process, a Magistrate Court-appointed Administrator takes over your debt repayments and distributes the payment to your creditors every quarter.
Interest often continues to accumulate on your debt, and you have to repay the full outstanding amounts.
The Benefits and Limitations of Administration are below, and explain what this legal process can and cannot do.
Benefits:
- Legal protection from creditors.
- Simplifies repayments into one monthly amount.
- Suitable for individuals with relatively small debts.
Limitations:
- Applies only to debts under R80,000.
- 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 installment.
Are you Still Unsure Which legal Option Fits Your Situation?
If the options still feel confusing, this side-by-side comparison can help you see what really matters before making a decision.
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
These Are High Risk. With No Legal Protection or Guarantees
Not every debt solution you see online is legal, and many of the “new” or “evolved” options are simply risky workarounds.
With no court protection, no regulatory oversight, and usually no long-term results.
They might sound helpful or convenient, but none of them stop legal action, freeze interest, or shield you from creditors.
Common high-risk informal solutions 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 approaches may delay the legal debt problem, but they seldom resolve it.
You remain fully exposed to:
- Salary garnishees.
- Repossession of your assets.
- Summons and Judgments.
- Continuous interest and penalties.
- And the emotional strain of ongoing creditor pressure.
These options may sound appealing, but they do not provide the legal protection most people believe they do.
If you need real protection, only formal, regulated legal processes can stop the chaos and protect your income.
And give you a legal and reliable way forward.
What Matters Most When Choosing a Debt Solution
There are only 3 legal debt relief processes in South Africa.
Each legal process has a clear purpose, structure, and set of rules.
If you are serious about breaking the debt cycle, take the time to understand your options.
Know your rights.
Know the risks.
And most importantly, choose a solution that gives you an outcome you deserve.
Not another temporary payment that keeps you stuck.
Not all debt relief options are created equal, and the wrong choice can cost you years of money, stress, and progress.
At Ursula Gouws Consulting, we cut through the sales talk, the marketing noise, and the industry pressure.
We show you what actually works for you, in your real situation, with your real numbers, so you can make the safest, smartest legal decision for your financial future.
We look forward to meeting you.
The Ursula Gouws Consulting team has assisted and supported thousands of individuals and businesses through this difficult time, helping them achieve financial stability.
Disclaimer
Ursula Gouws Consulting assists with only legal debt relief solutions in South Africa, including Personal Sequestration, Business Liquidation, and Debt Counselling. We are not lenders or providers of credit. All services are offered in compliance with the National Credit Act (NCA) and South African Insolvency Law. Results vary depending on individual circumstances.