Recovery of arrear levies: what is a Section 65 financial enquiry?

After judgment against an owner for arrear levies has been obtained, one of the critical steps in the execution process is initiating a Section 65 financial enquiry in terms of the Magistrates’ Courts Act No. 32 of 1944.

The Section 65 financial enquiry is designed to assess the financial situation of a debtor and is conducted to establish a feasible repayment plan that reflects the debtor’s current financial capacity.

Steps in the Section 65 Financial Enquiry Process:

This letter set out the details of the judgment and requests that the debtor makes payment within 10 days and is usually sent by the creditor’s attorney via registered mail to the debtor.

If the debtor fails to make payment, the creditor’s attorney will submit a Section 65 Notice, to the court to be issued.

The Section 65 Notice records the debtor’s failure to make payment of the judgment debt, the need to ascertain their payment capability, the court allocated date on which the debtor is required to appear in court for the financial enquiry and that the debtor will be required to provide detailed information about their income, expenses, assets, and liabilities. Once issued the Section 65 Notice will be served by the sheriff on the debtor.

On the day of the set for the financial enquiry, the debtor is questioned under oath to get a fuller picture of their financial status. This can include asking about employment details, existing debts, and living expenses.

The matter can be postponed (also referred to as an adjournment) for a number of reasons at this stage. For example, if the debtor failed to provide a copy of their payslip to prove their income the matter is postponed to a new date and the debtor is ordered to bring a copy of the payslip to court on the next occasion.

Should the debtor fail to appear in court, a warrant of arrest will be issued and served on the debtor. When the warrant of arrest is served on the debtor, the debtor is brought to court, receives a reprimand and a new date for the financial enquiry is set.

After evaluating the information, the Magistrate will make a ruling on how the debtor should fulfil their debt obligations based on their financial capacity. The court is responsible for ensuring that any repayment plan does not compromise the debtor’s ability to maintain a basic standard of living.

However, if a creditor is not satisfied with the proposed terms of a repayment plan and wishes to proceed with other options available in the execution process, the creditor’s attorney will be instructed to request the court to record that settlement was not possible and the reason thereof. For example, the judgment debt for arrear levies is for the amount of R 50 000.00, but the defaulting owner is currently unemployed and only offers to make payments of R 50 per month. The body corporate (creditor) can reject this offer on the basis that the debt will only continue to escalate and will have negative repercussions on the body corporate complying with its other statutory obligations such as maintaining a reserve fund.

If a repayment plan is agreed to, the details are recorded by the court. However, should the creditor become aware of a change in the debtor’s circumstance which leads them to believe that the debtor would be able to increase the monthly repayments, the creditor could apply to have the Section 65 financial enquiry set down for review.

The Section 65 financial enquiry is a valuable tool for creditors seeking to recover debts lawfully and effectively. It ensures that repayment plans are fair and consider the debtor’s financial situation, thereby increasing the likelihood of recovering judgment debt without resorting to more severe execution measures.