Acknowledgement of debt
Read the fine print before you sign an AOD.
When Tony’s daughter went to pick up her invitation for the Matric Dance, she was told that she could not receive the invite until her father had come in to see the school credit controller. When Tony visited the school office, he was asked to sign an ‘AOD’ – an acknowledgement that he was several months behind on school fees and indebted to the school for a specific amount. Once Tony signed the AOD, he was able to collect the invite.
This practice is not an isolated one in South Africa. Many creditors use it – and it’s perfectly legal. Some universities will withhold results should fees not be up-to-date. Once an AOD is signed, results are released.
What is an AOD?
An acknowledgement of debt, or AOD, is a document signed by a debtor stating that he or she acknowledges that they owe the creditor a prescribed sum of money and will pay it off on the agreed terms. Should the debtor fail to pay one instalment as indicated in the AOD, the creditor can immediately initiate legal action. AODs are drafted in terms of section 57 of the Magistrate’s Court Act 57 of 1944.
An AOD includes:
- The full names of the debtor
- The name of the creditor – whether a company or an individual
- The addresses of both parties
- The total amount of money owed by the debtor to the creditor
- The interest rate charge by the creditor
- The amount of each instalment, the date of payment and the time period of the repayment, or a lump sum payment by a particular day
- The banking details of the creditor – where the debtor must pay in the money
- The AOD must be signed by both parties as well as two witnesses.
Tips and guidelines
- You can refuse to sign an AOD but you must understand the implications of doing so.
- If you do not sign the AOD then you must receive a letter of demand from the creditor before summons can be issued against you as indicated in section 58 of the Magistrate’s Court Act 32 of 1944 (as amended).
- If you choose to sign the AOD, read the entire document and make sure you understand what you are signing. If you are unsure, contact an attorney for legal advice prior to signing.
- Once you have signed, you must repay the debt in terms of the AOD. If you miss an instalment, the creditor can take the documents to court and get a default judgement against you without any further notice to you.
- The creditor can also apply for an emoluments attachment order against your salary or a warrant of execution against your movable and later immovable property. You will also be held liable for the legal costs.
- If a judgement is granted, this will reflect on your credit profile until you have paid off the debt.
Resources
- Checked by Arinda Truter, SchoemanLaw Inc., www.schoemanlaw.co.za
- Legal Wise, www.legalwise.co.za
- African Bank, www.africanbank.co.za