Falling on Hard Times to Repay a Home Loan – Is Losing Your Home a Risk?

More than 20 years ago, Mr and Mrs van Rooyen concluded a written home loan agreement in respect of the property, with Standard Bank. Summons was issued in October 2021, and an application for default judgement was set down on the 15 February 2022.  Mr and Mrs van Rooyen attended in person and requested the opportunity to enter into a repayment agreement with Standard Bank. The matter was then postponed for that purpose.  Various attempts were made to enter into such a payment plan, all of which were unsuccessful and again the matter was set down during November 2022.  Mr and Mrs van Rooyen was then granted a postponement to obtain legal representation – they did so.  On the 21 December 2023, Standard Bank delivered its application for summary judgement in the sum of R234 196.28 and set it down for hearing, Mr and Mrs van Rooyen opposed the summary judgement. Both parties delivered submissions in relation to the question of the Court exercising its discretion in terms of the National Credit Act 34 of 2005 (“the NCA”). 

Judge Kantor dealt with the general principles of summary judgement and emphasised that it is not the Court’s role to determine the merits of a defence or the prospect of success – it is concerned with an assessment of whether the pleaded defence makes out a defence which is good in law or if it is a sham put up for the purposes of obtaining a delay. 

Mr and Mrs van Rooyen raised various defences in their Plea, for example, that they never received a letter of default in terms of Section 129 of the NCA, that they are over indebted in terms of the NCA, and that the matter must be referred to a debt counsellor. 

Judge Kantor was of the view that a bona fide defence had not been made out that the Van Rooyens did not receive the Section 129 letter – their nominated addresses were in the mortgage bond agreement, there was no notice given of any change of the address and the letter was served by affixing same on the principal door of the property.

Judge Kantor then dealt with the question of over indebtedness and was of the view that this is not a bona fide defence. Over indebtedness is dealt with in Section 79 (1) of the NCA:

“A consumer is over-indebted if the preponderance of available information at the time a determination is made indicates that the particular consumer is or will be unable to satisfy in a timely manner all the obligations under all the credit agreements to which the consumer is a party, having regard to that consumer’s-

(a) financial means, prospects and obligations; and

(b) probable propensity to satisfy in a timely manner all the obligations under all the credit agreements to which the consumer is a party, as indicated by the consumer’s history of debt repayment.”

Section 85, subsection 86. (1), (2), (7), and Section 87 of the NCA provides:

85. Court may declare and relieve over-indebtedness

Despite any provision of law or agreement to the contrary, in any court proceedings in which a credit agreement is being considered, if it is alleged that the consumer under a credit agreement is overindebted, the court may- 

• refer the matter directly to a debt counsellor with a request that the debt counsellor evaluate the consumer’s circumstances and make a recommendation to the court in terms of section 86(7); or 

• declare that the consumer is over-indebted, as determined in accordance with this Part, and make any order contemplated in section 87 to relieve the consumer’s over-indebtedness.

86. Application for debt review

(1)        A consumer may apply to a debt counsellor in the prescribed manner and form to have the consumer declared over-indebted.

(2)        An application in terms of this section may not be made in respect of, and does not apply to, a particular credit agreement if, at the time of that application, the credit provider under that credit agreement has proceeded to take the steps contemplated in section 130 to enforce that agreement.

…

(7)        If, as a result of an assessment conducted in terms of subsection (6), a debt counsellor reasonably concludes that …

(c)        the consumer is over-indebted, the debt counsellor may issue a proposal recommending that the Magistrate’s Court make either or both of the following orders- 

• that one or more of the consumer’s credit agreements be declared to be reckless credit, if the debt counsellor has concluded that those agreements appear to be reckless; and 

• that one or more of the consumer’s obligations be re-arranged by-

(aa)      extending the period of the agreement and reducing the amount of each payment due accordingly;

(bb)      postponing during a specified period the dates on which payments are due under the agreement;

(cc)      extending the period of the agreement and postponing during a specified period the dates on which payments are due under the agreement …

Mr and Mrs van Rooyen had not brought an application prior to the institution of the matter, in the prescribed form of Section 86 of the NCA, and could not do so thereafter. 

Mr and Mrs van Rooyen has made out an application made out for the application of Section 85 of the NCA – and although an application (let alone a formal application) was not made, this is not the requirement. The trigger for the application of Section 85 is simply the allegation in Court proceedings that the consumer, in terms of the agreement, is over indebted – it is common cause that Mr and Mrs van Rooyen are over indebted. 

Judge Kantor further stated that one of the considerations to which a Court will have regard to in determining to act in terms of Section 85, would be the reason for the consumer’s failure to have availed themselves of Section 86 of the NCA and he refers to the case of Firstrand Bank Ltd v Olivier 2009 (3) SA 353 (SEC) at 360D-H – both of these factors counted against the Van Rooyens in that Standard Bank has been a paragon, of patience and understanding over the years, affording the Van Rooyens multiple times to resolve the matter and rearranging the debt to assist them. It is very unsatisfactory that, after such indulgences from Standard Bank, the Van Rooyens now seek relief in terms of Section 85 and not previously in terms of Section 86. 

Despite of the above, the Van Rooyens serviced their home loan with the plaintiff faithfully for over 15 years and only started experiencing problems when Mr van Rooyen fell on hard times. Furthermore, the Van Rooyens have not simply stopped paying, nor have they paid token or negligible amounts, but rather, on average paid amounts which approximate 85% of the current instalment of R 4 117.59.  Judge Kantor noted that “… the impression I am left with is that the defendants have intend to honour their commitments and avoid losing their home for which they have been paying for over 20 years…”

Judge Kantor held that there should there be any avenue capable of reasonable consideration which may have a reasonable prospect of achieving it, ought to be explored.  Judge Kantor dealt with various factors that are relevant to the determination for the court to exercise its discretion in terms of Section 85, including;

1. The circumstances under which the debt was incurred; 

2. Whether the consumer is employed or has a source of income to pay off the debt; 

3. Whether the consumer failed to voluntarily avail himself or herself to the opportunity to approach a debt counsellor prior to debt enforcement; 

4. Whether the consumer provided a sufficient explanation for failure and request condemnation in respect thereof; 

5. The degree of prejudice to the credit provider if the consumer is afforded the protective measures of the of the NCA; 

6. The purpose of section three and other relevant sections of the NCA; 

7. That the consumer is not merely alleged to be over indebted, but it is in fact over indebted; 

8. Whether the consumer has disclosed other indebtedness; 

9. Whether the consumer attempted to make any further payments under the credit agreement or whether he abruptly stopped paying anything further; 

10. The potential to successfully reschedule the indebtedness under the agreement and; 

11. Any other further relevant circumstances.

Judge Kantor noted that this is probably the last opportunity for the Van Rooyens to avoid losing their home for which they have been paying for over 20 years, and recorded that “… (t)aking into account all of the above factors and in my exercise of my discretion, on balance I am inclined to afford them that opportunity..”. 

The court held that this is not indefinite and the matter must be finalised, therefore postponed the matter to the 7 October 2024 in terms of section 85 of the NCA, directly to a debt counsellor with the request that the debt counsellor evaluate the consumer’s circumstances and that the debt counsellor makes proposals and recommendations to the court.

My impression from this judgement, which I am of the view is a very well-reasoned judgement, is an indication that when it is foreseeable that you may fall onto hard times, most of which is unforeseen by you, but when there is an intent to endeavour to proceed to service debt agreements, that these are relevant facts be taken into account and protection is afforded to customers.

I recommend that the moment you find yourself involved in such a situation, seek legal advice and assistance.

The content does not constitute legal advice, are not intended to be a substitute for legal advice and should not be relied upon as such. Kindly contact us on info@cklaw.co.za or 021 556 9864 to speak to one of our attorneys.