Bad Debts

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  • Topic: Debt, Debtor, Bankruptcy
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  • Published : May 2, 2013
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MOOKGOPHONG LOCAL MUNICIPALITY

BAD DEBTS AND WRITE-OFF POLICY
FOR THE YEAR 2012 / 2013

MOOKGOPHONG LOCAL MUNICIPALITY

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BAD DEBTS AND WRITE-OFF POLICY

1.

DEFINITIONS For the purposes of this policy the following definitions are applicable:

“Debt” - means an amount owing to the Municipality; “Debtor” – means a person who owes the Municipality money for services rendered;

“Accounting Officer” – the Municipal Manager appointed in terms of Section 82 of the Municipal Structures Act, 1998 (Act No. 117 of 1998);

“Council” – means the council of the Municipality;
2. PURPOSE OF POLICY 2.1 Section 96 of the Local Governemnt: Municipal Systems Act, 32 0f 2000, provides that a municipality must collect all money that is due and payable to it, subject to the provisions of that Act and other applicable legislation. It is recognised, however, that circumstances may arise which may make the recovery of certain debts impossible, impractical or financially unfeasible, and that such debts may have to be written off. The purpose of this policy is to provide a framework for: 2.3.1 limiting the circumstances contemplated in 2.2; 2.3.2 determining, when such circumstances have arisen, whether to write off any debts; and 2.3.3 the procedures for writing off such debts.

2.2

2.3

3.

STEPS TO BE TAKEN BEFORE WRITING OFF DEBT Before consideration is given for the write-off of any debt the following steps should be taken: 3.1 CREDIT CONTROL AND DEBT COLLECTION POLICY ACTIONS All the applicable actions as contained in the Credit Control and Debt Collection

MOOKGOPHONG LOCAL MUNICIPALITY

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BAD DEBTS AND WRITE-OFF POLICY

Policy of the Municipality should have been executed and implemented. 3.2 ESTATE NOTICES MONITORING Estate notices in the Government Gazette must be checked regularly to enable the municipality to institute claims against insolvent and deceased estates of persons owing money to the Municipality. 3.3 TRACING OF DEBTORS In the event that the debtor’s address is not known, all reasonable steps must be taken to trace the debtor. A reasonable effort to trace the debtor will include, but is not limited to, the following: (a) Utilising all the information available (such as vehicle registration number, school attended by children, etc.) to locate the debtor; Utilising the telephone directory for the last town or city in which the debtor lived to locate the debtor and/or his/her relatives; and Contacting the following institutions or persons in order to locate the debtor: - The Vehicle Registration Authorities; - The Department of Home Affairs; and - Officials and/or colleagues at the debtor’s last place of employment. The Accounting Officer shall consider all other economically viable avenues for debt recovery, including the use of tracing agents, factoring of debts, recourse against sureties, guarantors or lessees, etc. 3.4 PREVENTION OF PRESCRIPTION OF DEBT (a) Prevention: Proccedings out of the appropriate court having jusrisdiction for the recovery of a debt must be commenced as soon as is appropriate in order to prevent prescription of the debt. Prescription Act, 1969 (Act No. 68 of 1969): Section 10 (1) of the Prescription Act provides that a debt shall be extinguished by prescription after the lapse of the period which in

(b)

(c)

(b)

MOOKGOPHONG LOCAL MUNICIPALITY

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BAD DEBTS AND WRITE-OFF POLICY

terms of the relevant law applies in respect of the prescription of such debt. The Municipality cannot legally enforce payment of a debt once the debt has prescribed, but the period of prescription is interrupted :(i) By the service on the debtor of any process whereby the creditor claims payment of the debt (Section 15). “Process” means a Summons or Notice of Motion, which must actually be served on the debtor nad not simply issued by the court, and does NOT include a registered letter of demand the debtor acknowledges liability, whether expressly or tacitly ( Section...
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