How To Safeguard Yourself In Debt Review Process If Joint Mortgage Holder

Your joint mortgage may form part of your partner’s debt review without your consent.

If you are married in community of property and your spouse is placed under debt review, so will you be because you share a joint estate that includes all debt.

However, what if you are married out of community of property, divorced or if you have taken a joint mortgage with a friend or relative? 

If the other party to the joint mortgage is placed under debt review, what rights do you have?

In theory a debt counsellor is supposed to inform the other bond holder about the debt review application of their client. 

So said Nthupang Magolego, senior legal adviser at the national credit regulator, adding: “This notification will give the consumer who has not applied for debt review an opportunity to consider various options that may be available. The consumer who has not applied for debt review will not be flagged at the credit bureaus.”

However, this does not appear to be happening in practice as a reader discovered when her former partner put himself under voluntary debt review.

“He signed over his power of attorney to a debt counselling company and renegotiated our monthly home loan repayments without him or the debt counsellor telling me. I found out by accident as the home loan repayments come off my ex’s account each month by debit order.”

She asked for the home loan to be removed from the debt review, but neither her ex nor the debt counsellor were willing to do so. The bank refused to remove the joint home loan from the debt review process and the incident turned into a blame game with the bank blaming the debt counselling company for applying for debt review on a joint home loan without both parties’ consent and the debt counselling company blaming the bank for not informing him or her it was a joint home loan when the bank sent through the certificate of balance (CoB). 

So, what actually should have happened, who is responsible for what and what are the rights of the reader in this regard?

Paul Slot, the head of the Debt Counselling Association of SA, said the issue of how to handle joint mortgages under debt review is not clearly defined in the National Credit Act, hence the confusion.

“Joint mortgages are not catered for in the National Credit Act and are very problematic. This topic has been under discussion at the Credit Industry Forum set up by the NCR for the past 10 years.”

Slot’s understanding of the law is that the onus is on the bank, not the debt counsellor to inform the client.

“The debt counsellor does not need to obtain the consent of the non-debt review partner as the debt counsellor has no legal relationship with the non-debt review consumer. It is the client under debt review, who is responsible for supplying the financial information and payment commitment from the non-debt review consumer. 

"On the other hand, the credit provider [bank] has a legal relationship with both consumers and they should inform both parties of the debt review application but they don’t always do this.” 

Although the joint mortgage can form part of the debt review process without the consent of the partner, if the partner is not overindebted, he/she cannot be included in the debt review process and it should not affect the partner’s credit record.

Slot explains how the process works:

• If a consumer applies for debt review and a joint mortgage is present, the bank will notify the debt counsellor on the CoB that the mortgage is a joint mortgage; 
• If the non-debt review bond holder is not overindebted, that person would not form part of the debt review unless married in community of property; 
• If the bond is paid in full by the non-debt review consumer then the bond can be excluded from debt review; 
• In other situations the debt counsellor should request the debt review applicant to obtain the non-debt review consumer’s financial commitment to pay the bond (this may include details of income and expenditure) and that payment should be made directly to the bank; and 
• No credit provider or debt counsellor has the statutory power to remove a bond from debt review unless the non-debt review partner has been paying 100% of the bond.

Considering this legal minefield, if you are going to enter into a joint home loan, make sure you have a separate agreement as to what happens if one of you can no longer pay or is put under debt review.