Are you drowning in debt and dreaming of the day it all just disappears? Is your debt extremely old? You have a chance for your dreams to come true.
Debt Prescription is essentially when your debt expires, meaning you no longer have to pay it.
Of course, nothing in life is that simple. Debt prescription comes with lots of terms and conditions. In this article, you’ll find out everything you need to know about debt prescription.
What is Debt Prescription?
Debt Prescription was introduced as a means of protecting South African consumers from unscrupulous credit providers, who are accountable for recklessly lending credit and have contributed to the detrimental debt crisis in South Africa.
Prescribed debt can be understood as old debt that has been unacknowledged for a certain amount of time. The time period for this changes based on the type of debt you are working with. Nevertheless, the important thing to understand is that it is unacknowledged - if the debtor or creditor acknowledges the debt, then it will remain valid.
This means that if a creditor tries to contact you about the debt, it is not prescribed - but if they don’t, it can prescribe.
The Debt Prescription Act 68
Implemented in South Africa in 1968, enforces the regulation of prescription and states that debt can be considered as prescribed if the following requirements occur:
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If in anyway, verbally or in writing, have failed to acknowledge the existence of the debt
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If you have not made a debt repayment for that particular debt in the designated time period
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If you have not been summonsed in respect of the debt within the designated time period
If the debt has prescribed — You are not legally obligated to pay for it.
However, with regards to prescription in South Africa, it is important to bear in mind that not all debt prescribes in a period of three years.
Time periods for debt prescription
As mentioned above, there are different “expiration dates” for different types of debt. Let’s take a look at some of them below.
Please note - these debts can only expire or prescribe they meet the other requirements mentioned above too.
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3 years - Debts relating to delicts or contracts and bodily injury claims at the Road Accident fund will prescribe after 3 years.
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6 years - Debt relating to negotiable or notarial contract or a bill of exchange will prescribe after 6 years.
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15 years - Debt that comes from advances or loans by the state and are still owed to them will prescribe after 15 years.
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30 years - Debt that has arisen from a mortgage bond, a result of a court judgement, taxation, or debt owing to the state in regards to profits from mining of minerals will only prescribe after 30 years.
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When does the prescription period start to run?
Essentially, prescription begins at the first point where all of the requirements are present. When the debt becomes due and nobody acknowledges it, then the prescription period will begin.
Which types of debt will not prescribe?
There are various types of debt that are unable to prescribe. In other words, you cannot get out of paying these debts at all, under any circumstances.
SARS related debt
Side stepping taxes is against the law. SARS have many ways of collecting debt from you - they can take it straight from your employer or even sell your assets.
If you let your SARS related debt accumulate, it will not prescribe and you will put yourself in a very difficult situation.
Municipal debt
This includes electricity, taxes, tariffs, and any other governmental accounts or rates. Your resources will be cut off if you do not pay these accounts.
TV Licence
If you do not pay your TV licence, you will be given a 10% penalty for every month that you miss. The total - and accumulated - balance will be due for 30 years.
How Debt Prescription is part of consumer protection
South African consumers have the two defences, induplum and prescription, against credit providers:
1. Induplum
The induplum rule simply states that upon default, the interest charged against a consumer cannot exceed the capital outstanding, that is to say, all a consumer can only ever pay as a maximum, is double the original debt amount at the time of default.
2. Prescription
Prescription in South Africa refers to old debt, which occurs when it is no longer obligatory for a debtor to pay off their debt. Unfortunately, many South Africans are not aware that debt can prescribe.
The purpose of debt prescription
The purpose of prescription in South Africa is to compel creditors and collections agents to collect money owed to them within a specified period and not delay recovery so that it accumulates massive amounts of interest and costs.
Can a debt that has been prescribed be revived?
If the debt has already been prescribed, then it cannot be revived.
However, if the creditor or debtor acknowledges the debt within the time period before the debt has legally prescribed, then it can be prescribed.
How can the status of debt be tracked?
You can check if your debt is prescribed by checking your credit report. It should indicate on the report whether your debt is prescribed or not.
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