Under Debt Review? Why You Simply Can't Afford Not to Pay

Are You Under Debt Review?

If you are under debt review, also known as debt counselling it is absolutely imperative that you make every single rehab payment.

Debt Counselling is a formal debt solution introduced by South Africa’s National Credit Act of 2007. It is a process that is aimed to get you debt free within 60 months, through thorough debt management, a structured repayment plan, and lowered interest rates.

In your first two months your quoted payment amount will go toward the following fees: Restructure, Application, Administration, Sundry and Reckless Lending fees, in order for us to get the best reduced instalments and interest rates from your credit providers.

These are all as per the NCR guidelines. We will obtain legal protection from your credit providers to secure your account under the process of debt counselling.

Your creditors are aware of this and agree to it. It is important to note that these have all been calculated into your repayment plan.

From the third month onward, your payment will be distributed to your credit providers, as we are provided 60 days to negotiate with your creditors.

Why is it Important to Make Every Repayment?

When you miss a payment, somebody from the DebtBusters collections team will be in touch with you to find out what has gone wrong. If you miss three consecutive payments, you will be suspended. After that, you have 10 days to make a payment for arrears. Should you still miss the payments, you will be withdrawn from the debt counselling process.

Since you’ll no longer be under the protection of us as your Debt Counsellor, you will then have to manage credit providers on your own - and they will act very quickly. The negotiated instalments and interest rates will revert back to the original agreement you had with creditors.

Not only will you have to deal with their consistent phone calls again, but by not paying you are giving them the right to bring legal action against you.

DebtBusters will still be flagged as your debt counsellor at the credit bureaus, and you will not be able to take out any more loans or credit.

Legal Action that Can be Taken Against you Includes:

• Creditors can terminate the agreements.
• Creditors can get judgments against you and take your assets.
• If you are not under debt counselling, creditors can also demand a portion of your monthly salary.

Nosiphiwo Nxawe, Head of Payments & Collections at DebtBusters says, “Missing a payment is just not worth it. Your creditors have already made allowances by agreeing to new payment plans, and by defaulting on those you are opening yourself up to legal action and stand the risk of losing your house and/or car. You are also taking a major backwards step with regards to your financial recovery.”

A Recent Increase in Late Repayments from Those Under Debt Review

The industry is seeing an increase in non-payments of late. This is highly concerning as lives are being ripped up at the seams. Your credit providers will not hesitate to repossess your car and/or house in order to pay off your debt.

South Africans under debt review need to realise that they have been thrown a lifeline. By paying a negotiated, affordable amount every month you avoid repossession, legal action and give yourself and your family the chance at a sound financial future.

The Process that Takes Place After you have Missed a Payment:

It is in your best interest to not miss a payment. We know that being in debt is stressful. But being in debt with no protection is so much worse.

If you miss one payment, your debt counsellor will contact you to see if there is a way to help. We understand that circumstances may change and issues may arise. Together they will try to work out a plan with you.

You will still need you to pay though - as creditors can get fairly impatient. After 3 missed payments, this is what happens:

1. Your creditors will terminate your debt review agreement

As you haven’t paid, we at DebtBusters will not be able to avoid the termination of your protection. You will have faulted on the newly agreed upon terms, and creditors will no longer be accepting of lenient terms. They will revert to the initial terms of your credit agreement.

2. The legal process then begins and you will be issued a Section 129 letter

The NCA states that the credit provider must give you a written notice before they take legal action against you. In this notice, they should suggest that you consider debt counselling as an option. But let us assume for this article that you have lost your debt counselling benefits.

The purpose of this notice is to resolve any dispute under your credit agreement, or develop and agree on a plan to bring the payments under the agreement up to date.

You will have 10 days to respond to this notice. If you don’t respond, the creditors have the right to take legal action against you.

3. You will receive a summons

Here you will be required to appear before the magistrate and receive a judgement against you. In the court, you may be told to surrender your estate.

4. Warrant of Execution — moveable assets will be seized

If you have a car, it will be repossessed and sold at an auction in order to cover at least a portion of your debt. If you do not have any movable assets that can be attached the following can happen:

• Section 65A enquiry at Court — where you have to attend court with all your income and expenses.
• The magistrate then makes a ruling on how money you will have to pay back monthly.

If you do not adhere to that order the credit provider can automatically have a garnishee order issued.

What is a Garnishee order?

A garnishee order is associated with individuals who can no longer afford their debt, cannot meet their debt repayments and are unable to come up with the means to settle their debt due to a lack of assets.

Most commonly, garnishee orders are requested from Credit Providers who are owed loan repayments from consumers who have defaulted on their contractual obligations to repay the loan.

The garnishee order provides the over indebted individual’s employer with the legal means to deduct a certain amount of money from the individual's salary each month, which is given to the debt administrator in order to settle the individual’s debt.

Through the process of debt administration, The Magistrate’s Court Act allows the debt administrator to deduct 12,5% of the total amount deducted, before paying the individual's credit providers. Garnishee orders guarantee that the credit provider will be paid back and provided with a monthly instalment.

What Happens if you Don't Have Assets such as a House or Car?

You cannot be sequestered if you do not have any assets. However, if you have a job, you will be required to pay an amount in cash either as a lump sum or as a monthly payment.

Make your Payments

As you can see, if you are under debt counselling, you need to make your repayments as the plan has been pre-arranged with your creditors for your benefit.

Defaulting on payments means the loss of benefits you receive under debt counselling. In other words, you’ll no longer be legally protected, your interest rates will revert back to their original amounts, and your creditors will be knocking on your door. Don’t let it get this far.

If you are struggling with debt please get in touch with DebtBusters. Don’t hesitate to give us a call on 086 999 0606 or email us at info@debtbusters.co.za.