Debt has become an unfortunate aspect of modern life. Costs are outstripping our capacity to pay. Gone are our parents’ or even grandparents’ days when you saved before you purchased. Today, we aspire to so much that the demand for immediate possession and appearance can cripple the average pay-packet. What is pivotal to handling debt is firstly to understand your position and your rights, and secondly to get as much help as you can from the professionals geared to make your repayment process as stress-free as possible.
Not paying your debts
When the expenses of everyday living starts to outweigh the disposable income at hand, most debtors simply stop paying those creditors they consider as unnecessary. This can have a detrimental effect on the debtor and is the beginning of the downward spiral. So what do creditors do in this situation?
Most creditors will start off by demanding payment from the debtor directly, usually through telephone calls, emails, letters and these days they even send the odd sms. At this point, and depending on the resources available to the creditor, they may decide to ‘blacklist’ the debtor. This means that they will contact a credit report company who will make a note on your credit report. The note will usually read something like ‘pays late’ or ‘does not pay account’. This may sound like it is a waste of time for the creditor but the effect is that all future credit providers, employers and financers will have access to this information. And this information will determine whether they are prepared to offer you credit, financial assistance or employment.
Handed over
But creditors won’t just stop there. Most creditors will hand the debt over to an experienced debt collection company or choose to sell the debt to a third party to collect in order to remove it from their financial records. The debt collectors will start by contacting your directly in order to make a payment arrangement. However, in instances where the debtor appears unresponsive or breaks their payment arrangements, the debt collector will proceed with legal steps. They will likely not stop until they have received judgement against your name and will start taking some of your possessions to sell in order to settle the debt.
Although notes on bad payment on your credit record only last for two years, judgements are noted on your credit record for five years. But don’t be fooled. Just because judgement no longer appears against your name after five years does not mean that the judgement has disappeared. The actual judgement still remains valid and enforceable against you for up to thirty years. Meaning debt collectors will still be knocking on your door for years to come.
So what can you do?
Debt review
In 2007 the National Credit Act (NCA) ensured that legal action cannot be taken against you if you’re in the process of receiving debt counselling and paying off your debts. However, you can only take advantage of this provided you have a regular income that will allow you to develop a reasonable repayment plan.
How it works:
- Engage a debt counsellor. You can search for one at www.ncr.org.za or contact our office directly to put you in contact with one. You will have to present your payslip, ID, and all current monthly repayments – plus a monthly budget of other living expenses such as food and petrol.
- The debt counsellor will work out if you are over-indebted (if your payments are simply unaffordable on your current income), how much you need to live on and what is available to repay debts.
- There are costs, and these are: an application fee; a rejection fee (to weed out frivolous applications); a restructuring fee; a small monthly fee; a legal fee that is needed for the consent order in the second month; and, should you withdraw from the process before completion, a withdrawal fee.
The debt counsellor will then:
- Contact all your credit providers and check that amounts owed are correct, and tell credit bureaus to list you as being under debt counselling – which is a protection, not a blacklisting.
- If all the credit providers agree with the repayment proposals offered by the debt counsellor, a legal ‘consent order’ will be obtained. (In many cases this could mean a reduction in fees and interest payable by consumer).
- Once agreement has been reached, the debt counsellor will give you your final repayment plan and also submit it to a Payment Distribution Agency. This plan will take a lump sum from you each month and split it up between the credit providers, according to the repayment plan. Your obligation is to keep up the monthly payments until such time as the whole amount has been paid off.
Debt collectors
It would be advisable for you to contact the creditor immediately when payment on your outstanding account cannot be made before they take further action. Most creditors are found to be accommodating towards debtors and may accept alternative arrangements, provided you keep to these arrangements. If, however, a debt collector has already been appointed, we suggest the following to assist you in dealing with them amicably:
- Do not try to avoid the debt collector. When you do this the debt collector will immediately institute legal proceedings against you for which you will be responsible for the costs.
- Ask the debt collector to send you a statement of the outstanding debt so that you may check the amount is correct and clear up any questions you may have.
- Try to make a payment arrangement with the debt collector. You do not need to pay the debt in one lump sum if you cannot afford to, but you do need to start making payment in some form in order to keep the courts out of it.
- Keep track of the payments that you are making to the debt collector. Remember that you remain responsible for collection costs throughout the whole process and need to take that into account. Request a new balance statement every six months in order to stay updated with these costs.
- If you are in a position to do so, offer the debt collector a lump sum in full and final settlement of the account. Remember to get the agreement in writing before making the final payment.
- When you have made the final payment, request a paid up letter from the creditor.
- Do not expect the debt collector write off the debt due to your current personal situation. Debt collectors deal with various debtors in similar situations. They also need to take care of the creditor’s interest and do not possess the authority to write off debt. You should, however, inform them of your current situation and anything that may have in impact on it as it could assist in making favorable payment arrangements.
- Always stay in communication with your debt collector. If you dispute the debt, try and sort it out with them first.
- If you dispute the debt and feel that you are not getting proper assistance from the debt collector, you should approach an attorney or the court where the judgement was obtained for assistance.
Know your rights
- You can request how and when debt collectors contact you — including that they cease communication altogether.
- Debt collectors cannot mislead you about who they are, how much money you owe or the legal repercussions of not paying your debt — for instance, by threatening arrest.
Debt collectors are not allowed to:
- Call before 8am or after 9pm, unless the consumer has given them permission.
- Call on a Sunday.
- Contact consumers at work if they know that the consumers employer doesn’t want them to be contacted during work hours.
- Get in touch with your employer about the debt you owe, unless that debt is past-due child maintenance.
- Contact relatives, friends or neighbours to embarrass you into paying your debt. They can however contact them to find out how to get in touch with you but are not permitted to say why they need the information.
- Call you over and over again during a relatively short period of time. For example calling you repeatedly during a single morning or afternoon.
- Swear or insult you, or threaten violence.
Get professional advice
At Simpsons our modus operandi is to ensure that every South African is able to receive the advice and support they need – no matter the circumstances. While personal injury claims are our specialty – whether resulting from transport accidents, medical negligence or product and public liability – we also offer advice and assistance in areas of difficulty for people with regard to situations such as divorce, custody and debt relief. We offer each client a personalised service because every set of circumstances is individual in nature whether physical, emotional or financial.
Find out more about us at: www.simpsons.co.za
