Ursula Gouws Consulting
Legal Debt Relief Options
You deserve A legal plan that works for you
Legal Debt Relief Options in South Africa
Let us talk about the truth behind your options — 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 legal debt solutions in South Africa.
Legal Debt Relief Options - Processes in South Africa
There are only 3 legal debt relief processes in South Africa.
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 three 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)
Sequestration is a formal 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.
Its purpose is not to punish you but to protect you: to stop legal action, relieve creditor pressure, and give you a structured, lawful pathway to rebuild your financial life.
Personal Sequestration is not a loophole or a shortcut.
It is a regulated legal process under South African Insolvency law that gives honest people a second chance.
Once the High Court grants the order, you are protected under the Insolvency Act, and your debt is written off through the legal distribution process.
When you are ready, the rehabilitation process restores your legal status and gives you full financial freedom once more.
If you are overwhelmed and see no way out, Sequestration may be the lawful, clean break that finally resets your financial future.
The benefits and limitations 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.
- Your income becomes yours again. No monthly payments to creditors.
- The process offers a full financial reset through a legal High Court Order.
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.
2. 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 R50,000) who still need legal protection from creditors but cannot afford larger restructuring options.
Under this process, a court-appointed Administrator takes over your repayments and distributes a portion of your income to your creditors each month.
It is a simple, low-level solution that provides legal protection but does not offer a financial reset.
Administration can offer breathing room when your debt is small, your income is limited, and you need the Magistrates’ Court to step in and manage your creditors.
But it is not a long-term financial solution.
Interest often continues to accumulate. The process can take years, and you still have to repay the full outstanding amounts.
For some people, it is a useful protective barrier; for others, it becomes a slow, expensive trap.
If your debt is larger than R50,000 or you need a more decisive outcome, one of the other legal processes may be far more effective in giving you real relief and a clear path forward.
The benefits and limitations below explain what this process can and cannot do.
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.
3. 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.
Debt Counselling does not write off your debt. The process reorganizes or renegotiates the debt.
Debt Counselling can provide strong protection and breathing room when you have income but can no longer manage multiple installments or creditor pressure.
With a court order in place, your payments become predictable, interest may be reduced, and you are legally shielded from new legal action.
But it also comes with responsibilities. You must repay all your debt; the process can take several years, and exiting the system requires full repayment.
For many people, this is a stabilising solution.
For others, it becomes a long, expensive commitment.
Understanding your affordability and long-term goals is key to deciding whether Debt Counselling is the right path for you.
The benefits and limitations below explain 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 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.
Do you still find yourself trapped in the debt spiral? Let us 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
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 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 never 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.
If you need real protection.
Only formal, regulated legal processes can stop the chaos. Protect your income.
And give you a reliable way forward.
Conclusion - Legal debt relief options in South Africa
There are only 3 legal debt relief processes in South Africa.
Each process has a clear purpose, structure, and set of rules.
Personal Sequestration can legally write off your debt and give you a complete financial reset.
If you are serious about breaking the 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.
Not another temporary payment that keeps you stuck.
Not all debt relief is 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.