Many people use the words “rehabilitation”, “debt review”, “blacklisting”, and “name clearing” interchangeably. They are not interchangeable. They refer to entirely different processes, governed by different statutes, run by different professionals, and producing different outcomes.
If you ask the wrong process to do the wrong job, you will spend money and time without getting the result you want. This article sets out the differences plainly.
The two processes at a glance
| Rehabilitation after sequestration | Debt review | |
|---|---|---|
| Statute | Insolvency Act 24 of 1936, section 124 | National Credit Act 34 of 2005, section 86 |
| Available to | Persons whose estates have been sequestrated | Persons who are over-indebted but not sequestrated |
| Run by | Attorney (High Court application) | Registered debt counsellor (regulated by the National Credit Regulator) |
| Forum | High Court | Magistrates’ Court (consent order) or Tribunal |
| Outcome | Status of insolvency ends; most pre-sequestration debts discharged | Restructured repayment of existing debts; no debts written off |
| Effect on credit record | Insolvency listing must be updated by bureaux after order | Specific NCR-prescribed flag while under review |
| Typical duration | Three to six months | Years, until debts are repaid under the restructured plan |
Who needs what
You need a rehabilitation application if:
- your estate was sequestrated (whether by voluntary surrender or by creditor application); and
- you want to end your status as an insolvent and have most of your pre-sequestration debts formally discharged.
You need debt review if:
- you have not been sequestrated;
- you are over-indebted in the NCA sense; and
- you want a restructured plan to repay your existing credit agreements.
These are not stages of one process. They are two roads serving different audiences.
Common confusion points
“I am blacklisted, so I need rehabilitation.”
Not necessarily. “Blacklisting” is a colloquial reference to adverse listings on credit bureaux. Adverse listings can arise from many things that have nothing to do with sequestration — judgments, defaults, administration orders, late payments. Rehabilitation deals only with insolvency status. If you have not been sequestrated, rehabilitation is not the answer.
“I am under debt review and want to be rehabilitated.”
If you are only under debt review and have never been sequestrated, you cannot be rehabilitated in the section 124 sense, because there is nothing to rehabilitate from. What you may want is to exit debt review, which is a separate NCA process.
“I was sequestrated and now I am also in debt review.”
It is possible to be sequestrated in the past and to find yourself over-indebted again in the future on debts incurred after sequestration. Rehabilitation does not affect post-sequestration debts. Those debts remain yours and must be dealt with on their own terms.
“Can a debt counsellor get me rehabilitated?”
No. A debt counsellor is regulated under the National Credit Act and assists with debt review under section 86. A debt counsellor is not authorised to bring a High Court rehabilitation application. Only a legal practitioner can do that.
“Will rehabilitation remove me from the credit bureaux automatically?”
No. The grant of a rehabilitation order ends the legal status of insolvency, and the bureaux must update the insolvency listing once notified. Other unrelated listings (for example, post-sequestration judgments) are not affected by the order.
How to tell which you actually need
Three quick questions:
- Was your estate sequestrated? If no, you are not a candidate for rehabilitation under section 124.
- Is your problem about ending the legal status of insolvency, or about repaying current debts? Rehabilitation deals with the first; debt review deals with the second.
- Are the debts you are worried about pre-sequestration or post-sequestration? Rehabilitation deals with most pre-sequestration debts; it does not touch debts incurred after sequestration.
If after these questions you still are not sure, that is exactly what a screening consultation is for. We will tell you, candidly, which process — if any — applies to your situation, and refer you to the right professional if it is not us.
What rehabilitation will not do
It will not:
- remove unrelated judgments or adverse listings;
- discharge debts that arose after your sequestration;
- discharge debts that fall within the section 129 exceptions (including certain debts tainted by fraud);
- restore directorships that are disqualified for reasons other than insolvency under the Companies Act;
- expunge any criminal record (criminal expungement is a different process under the Criminal Procedure Act).
It will:
- end your status of insolvency;
- discharge most of your pre-sequestration debts; and
- restore your legal capacity to contract, trade, and hold office, subject to any other statutory disqualification.
Bottom line
If you were sequestrated and want a clean legal exit, rehabilitation is your route, and you need an attorney. If you were not sequestrated and you are struggling with current debts, debt review may be your route, and you need a registered debt counsellor. These are not the same service and they do not lead to the same outcome.
If you are not sure which side of the line you fall on, send us a short confidential enquiry. We will tell you, even if the answer is that we are not the right people.
This article is general information about South African law as we understand it on the date of publication. It is not legal advice. Each matter turns on its own facts. Speak to a legal practitioner before acting.