Debt education is an important life skill that most of us did not have the privilege to acquire when growing up. Fostering knowledge about debt, its causes, its solutions and how to react to events that directly influence your debt forms part of this skill set.
It is never too late to learn and change your financial legacy. Educating yourself on how to budget, or how to manoeuvre through a cash flow crisis, or how to build healthy financial habits will cultivate the skillset to achieve financial freedom.
Explore the Debt Review Knowledge Centre topics below to take back the power over your finances and end the helplessness and vulnerability caused by over-indebtedness.
A: You can check your credit record with any credit bureau. There are mainly four credit bureaus in South Africa. They include; TransUnion, XDS, Experian and Compuscan.
By law, you are entitled to pull your credit record for free annually.
A: First, we would recommend that you pull your credit record to see what it looks like and whether it is in good standing or not. It is also a good idea to check your credit record regularly to make sure everything is as it should be.
If you see that there are accounts whose status are in arrears you will have to pay the arrears, and then make sure that you keep up to date with those accounts going forward.
If you have Judgements or Administration Orders on your profile you will need to settle the outstanding debts in order to have that information removed.
Avoid applying at various creditors for credit in a short period of time, this will affect your score negatively. Furthermore, every time you apply for credit and it gets disapproved it also negatively impacts your credit record.
The best way to improve and keep your credit record in good standing is by paying the full instalment that is due on time every month and checking your credit record on a regular basis.
A: You are insolvent when your liabilities are more than your assets. When considering your assets, you include all income, properties, vehicles, cash in the bank, investments etc. Liabilities are all your debt.
If you want to remain solvent, you must be in a position where your assets are more than your liabilities. When you are insolvent, you can apply for sequestration, which is a process where your assets are sold to offset your liabilities.
Usually, your creditors must get a specific percentage of the proceeds of the sale of your assets. After this, you will not be able to apply for credit for five years, after which you can apply for a rehabilitation order. There are alternatives such as Debt Review, which you should consider first before applying for sequestration.
A: You can log a dispute directly with the credit bureau where the wrong information is listed on your record.
If the wrong information is because of a specific creditor you can log a complaint with the Credit Ombud to dispute the listing on your record.
A: Debt can only be written off by two means, namely Prescribed Debt and Reckless Lending.
Debt has only prescribed if there has been no attempt by the credit provider to collect it or if no summons has been issued for the debt during the last 3 years. Also, if there has been no acknowledgement of debt during the last 3 years. If you have made any form of payment in the last 3 years it constitutes an acknowledgement of debt.
Prescription of debt is a defence; so, when the credit provider attempts to collect you can claim prescription as a defence. You will need to get an attorney to write a letter on your behalf to the respective credit providers notifying them that the debt has prescribed. If the debt has indeed prescribed already, the new Credit Amendment Act prohibits the prescription to be interrupted after 3 years.
The exception to the above-mentioned is Bond Accounts and Judgements – as the term for these are 30 years.
Reckless Lending is when a creditor has failed to conduct a thorough affordability assessment – as required by the National Credit Act (NCA) – at the time of giving the credit. It is also when the credit provider has given credit despite the fact that you did not understand the costs and obligations of the agreement, or when the credit agreement will lead to you becoming over-indebted.
At DebtSafe we offer the option to our new clients of conducting a Reckless Lending investigation.
A quick note about Credit Amnesty
Credit Amnesty was a once-off occurrence between April and June 2014 where the credit bureaus were forced to remove adverse information from credit records. In no way did Credit Amnesty write off people’s debt, it only removed outdated information from the credit records of people who have paid-up their debt.
A: Yes, you can.
Surrendering your vehicle while your payments are still up to date:
Contact the creditor and give them a written notice that you want to surrender your vehicle. In five business days, you will have to surrender the vehicle to the creditor. Within ten business days of receiving your written notice, the creditor is required to provide you with an official evaluation of the vehicle (stating its value). The creditor will then sell your vehicle. If the creditor sells your vehicle for less than you owe on the car you will be responsible to pay the outstanding amount.
If you are dissatisfied with the evaluation provided by the creditor you can withdraw the notice and recommence the possession of the vehicle. You can also sell your vehicle privately to get a better price.
Surrendering your vehicle when you are behind on payments:
You can inform your creditors that you want to voluntarily surrender your vehicle. Once you signed the voluntary agreement your car will be repossessed.
When you surrender the vehicle during the debt review process – the correct procedure will be to suspend further payments to the creditor until the shortfall amount, if any, has been established. Whereupon, depending on the circumstances, repayment can continue.
A: Yes, you definitely can – don’t feel intimidated by creditors; you have the right to negotiate with them if you anticipate that you will be having trouble repaying your debt. Plus, being proactive will count in your favour.
Before getting everything ready for your negotiations, take the following into account:
- Each creditor will want as much as possible. So you will have to show them that you truly only have a certain amount available and that your offer is reasonable considering your financial situation.
- Most creditors will not be able to accept a pro rata amount on certain accounts (like a vehicle loan or home loan) and may require more than the pro rata amount in order for them to justify that you keep that asset.
- Each creditor will have to be approached individually.
What you need before approaching your creditors:
- A written motivation describing how your financial situation has changed, leaving you in a position where it is necessary to make new arrangements on your credit agreements. Also, add how you have tried your best to keep up with the payments by cutting out unnecessary costs.
- A comprehensive budget that shows your cash flow exactly. On this budget, you need to show what money is coming in, and what all your expenses are (debt repayments, service agreements and essential living costs).
- Calculate how much you can pay each creditor. During this calculation, you will need to prioritise the most critical accounts (like your home loan, car loan, rent etc.)
- Decide for how long you will need leniency on your payments (remember, negotiating for a better repayment plan is only a temporary arrangement, like a few months, and not an option long-term)
- Compile a repayment plan that specifies how much you propose to pay during the leniency period, and how you plan to catch up with the payments after the leniency period is done.
When you have the above in order you can draft a proposal for each creditor. Your proposal will contain your motivation, your calculations for that specific creditor and your proposed repayment plan for that specific creditor. Then, make an appointment with each creditor and present your case, point for point.
As mentioned above, this arrangement with your creditors is only a short-term solution, your creditors will not agree to a long-term repayment adjustment. So if you see that you will need reduced instalments for the foreseeable future you should consider Debt Review which will most likely be a better debt solution.
Fix Debt Safely
When debt has you backed into a corner, it is crucial to find a safe and reliable way to fix your finances. Jumping for a quick solution will only make the situation worse. Instead, take a moment to educate yourself about safe and sustainable debt solutions.
Read more on how DebtSafe ensures the safest way to fix your debt.