Don’t pay Prescribed Debt: Understanding the Consequences and Alternatives

Are you struggling with prescribed debt? You're not alone. Prescribed debt is a term used to describe a debt that is no longer legally enforceable due to the passage of time. This type of debt is often the result of unpaid bills, loans, or credit card balances that have gone into default. While it may seem like a relief to be free from the legal obligation to repay this debt, there are still consequences to consider before making the decision not to pay.

Understanding the Consequences of Prescribed Debt

South Africans have for many years been exposed to unending credit obligations, with many of them finding it difficult to make payments. Credit providers attempt to collect any unpaid debt for a certain period of time. At some point, however, they decide to hand over or sell the debt to debt collection companies to collect for them. Regardless of how old the debt is, these companies aggressively chase payment from consumers.

In many cases, they are chasing debt that the consumer is not even aware of. This debt could be older than three years. It could also have no paper trail or proof that the consumer acknowledged the debt, to begin with.

The amendments of the National Credit Act passed in March 2015 have changed the way these debt collection companies are allowed to work by providing a clear decree on Prescribed Debt in South Africa.

Sadly, consumers are still not aware of what the National Credit Act says about Prescribed Debt, leaving them exposed to credit-collecting companies.  Let’s take a look at some of the consequences of prescribed debt.

Impact on credit score

One of the biggest consequences of prescribed debt is the negative impact it can have on your credit score. Even though the debt is no longer legally enforceable, it can still be reported to the credit bureaus and negatively impact your credit score. This can make it difficult to get approved for loans, credit cards, and even rental applications in the future.

Legal action

Another consequence of prescribed debt is the potential for legal action. While the debt itself may be prescribed, the creditor or debt collector may still take legal action to collect the debt. This can include wage garnishment, bank account levies, and even the seizure of personal property.

Debt collectors

Prescribed debt can lead to ongoing harassment from debt collectors. Even though the debt may be prescribed, the creditor or debt collector may still contact you in an attempt to collect the debt. This can be an overwhelming and stressful experience.

Alternatives to Not Paying Prescribed Debt

While it may seem like a relief to be free from the legal obligation to repay prescribed debt, there are alternatives to consider before making the decision not to pay.

Debt collector settlement

One alternative is to negotiate a settlement with the creditor or debt collector. This can involve paying a portion of the debt in exchange for the creditor agreeing to stop legal action and reporting the debt as settled to the credit bureaus.

Debt counselling

Another alternative is to work with a debt management program. These organizations can help you create a budget and develop a plan to pay off your debts. They can also negotiate with creditors on your behalf to reduce interest rates and monthly payments.

Bankruptcy

Finally, you may want to consider filing for bankruptcy as a way to discharge prescribed debt. While this can have a significant impact on your credit score, it can also provide a fresh start and relief from the burden of overwhelming debt.

Prescribed debt can be a relief from the legal obligation to repay the debt, but it still comes with consequences. Before making the decision not to pay, it's important to understand the potential impact on your credit score, the potential for legal action, and the ongoing harassment from debt collectors. Alternatives such as negotiating a settlement, working with a debt management program, or filing for bankruptcy should also be considered.

DebtBusters can help you understand prescribed debt

If you have not been contacted by the credit provider either by way of summons or obtaining a judgment against you within 3 years after you defaulted on paying your account, then your debt has been prescribed.

For at least three years, since the date that your outstanding debt was due, there must have been no acknowledgement of the debt by you and no contact made by the creditor for the debt, whether by summons, letter of demand or by phone.

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If you were not aware of the debt and had never been contacted by the credit provider to repay the debt for three consecutive years of the debt being due or of the last instalment that was made, then, your debt has become prescribed and legally, you do not have to repay the debt. There is one exception; if the debt is government debt or a home loan, it only becomes prescribed after 30 years, instead of three.

Collecting prescribed debt is illegal

Before the amendments of the NCA, it was common for consumers to be chased for prescribed debt. The NCA amendments that came into effect in March last year declared the collection of prescribed debt to be illegal.

Where consumers have been contacted by debt collectors or third party agencies on behalf of a credit provider asking for payment on old potentially prescribed debt, consumers should not acknowledge the debt in question. Acknowledgement of the debt would break the cycle of prescription, making you liable for the debt again.

If you are contacted for old debt, take down the details of who is calling and which company they represent. If your debt is prescribed, you need to report them to the NCR on 0860 627 627.