Alternatives to bankruptcy in South Africa that provides for a discharge of debts: Lessons from Kenya

Abstract

The problems faced by debtors in South Africa is not that there are no alternatives to insolvency proceedings, but that the available alternatives do not provide for a discharge of debt as with a sequestration order, which is ultimately what the debtor seeks to achieve. Debtors in South Africa can make use of debt review in terms of the National Credit Act 34 of 2005 or administration orders in terms of the Magistrates' Court Act 32 of 1944 to circumvent the sequestration process. However, both debt review and administration orders do not provide for a discharge of debt and provide for debt-restructuring only, in order to eventually satisfy the creditor's claims. Attention is given to the sequestration process and the alternatives to sequestration as they relate specifically to the discharge or lack of a discharge of a debtor's debts. The South African law is compared to Kenyan Law. This article seeks to analyse the alternatives to the bankruptcy provisions of the newly enacted Kenyan Insolvency Act 18 of 2015 in order to influence the possible reform of insolvency law in South Africa. Like the South African Insolvency Act, the old Kenyan Bankruptcy Act (Cap 53 of the Laws of Kenya) also did not have alternatives to bankruptcy. The old Kenyan Bankruptcy Act, however, contained a provision on schemes of arrangement and compositions. The Kenyan Insolvency Act now caters for alternatives to bankruptcy and provides a wide range of alternatives to bankruptcy, some of which allow debtors in different financial positions to obtain a discharge.