During our years in the debt counselling industry, we got used to bad behaviour from our major banks. Lack of co-operation, a disregard for consumers rights, unreasonable demands and many other problems were the norm.
Car repossession has a major impact on your life. Everything becomes more difficult – getting to work, getting the kids to and from school, medical emergencies… So you want to hold on to your car as much as you can.
But what if you can’t afford the installments anymore? Can the bank immediately repossess your vehicle?
There is a legal process that must first be followed, and you need to understand it to protect yourself. You should know your rights and what the law specifies in this matter.
How Cars Get Repossessed
There are two ways in which a bank can legally take possession of your vehicle.
In the first instance, a court order must be obtained ordering you to allow the vehicle financier to take the vehicle. If there is no court order, however, they cannot force you to give your car back.
Alternatively, it can be done through voluntary surrender in terms of the National Credit Act. Voluntary surrender of the vehicle is most credit providers’ first choice because it’s an easier, quicker and cheaper method to get the vehicle back.
What to Do When Confronted With Car Repossession
You must not be intimidated when ‘someone from the bank’ hands over a form for you to sign whilst trying to take possession of the vehicle. Any bank form you sign other than a summons, are most likely an agreement that you’re voluntarily giving the vehicle back. Few people realise that they are under no obligation to sign such a form and hand over the vehicle.
Unfortunately credit providers often blatantly bully consumers, and I want to make it very clear that at this stage you don’t have to hand over your vehicle.
What to Do When You Can’t Afford Your Car Installments
Should you find that you can no longer afford your vehicle, and are not in arrears with the payment thereof, you may choose to make use of Section 127 of the National Credit Act and voluntarily surrender your vehicle.
To arrange this you must give a written notice to your credit provider stating that you wish to terminate the credit agreement and that you require them to pick up the vehicle. As specified by the Act the credit provider must then furnish you with a letter within 10 days, indicating the estimated sale value of the vehicle. You can dispute the value if you are not satisfied with it, withdraw your notice and resume possession of your vehicle – but only if you are not behind on your installments.
In the case of a voluntary surrender, the bank is obliged by the Act to sell the vehicle as soon as possible and for the best price reasonably obtainable. It is important to realise that when the vehicle is sold at an auction, you are still liable to pay the shortfall if the vehicle is sold for less than the outstanding balance on the account – you could end up paying for a vehicle you don’t even have anymore. Some, however, may feel that it’s better to pay a reduced premium on a smaller amount, even if they don’t have the asset anymore, than paying a high premium for an asset they have but can’t afford.
On the other hand, if the credit provider wants to litigate and get a court order for the repossession of the vehicle, a summons must first be served on you. A court date will be set, where you can present your case.
This is one more reason to ensure that your credit provider always has your latest address on file, for without it the summons will still be served but you won’t know about it. Subsequently, you will also not know about the court date or be able to appeal your case in court.
If you tried to negotiate with the service provider for an adjusted payment plan, the Magistrate might understand and there could be some sort of leniency in the matter, possibly suggesting a reduced monthly premium over a longer period, to accommodate both parties.
However, if there is no record of negotiations, the vehicle may be awarded to the creditor to sell at any cost they deem reasonable to cover their expenses – and you may still end up paying the shortfall if it was sold for less than your outstanding balance.
How Debt Review Protects Your Car
There is an alternative solution that could help you keep your vehicle, namely debt review. As soon as you send your application form with the required documentation to the debt review team, a document (form 17.1) will be sent to the credit providers to inform them that you have applied for debt review. As of that moment, your car is protected against repossession, provided that no summons has been issued yet.
One of the benefits of our debt review program is that we negotiate reduced installments on your accounts; including your vehicle finance. In essence, it means you get to keep your vehicle for a reduced monthly installment.
Whilst the debt review program is not a payment holiday – you are after all still liable to settle all your debt – it provides breathing space in overstretched budgets and helps you to stay on your feet, with their critical assets intact.