Won’t it be nice if we could all pay our debts regularly? But life does not always work like that. It just so happens that there are many people who land on bad times and are unable to pay their debt regularly, or not at all. When this happens to you, what can happen and what can your creditors do and what can they not do to recover the debt?
The National Credit Act regulates most credit agreements and determines what your creditors can do to enforce payment.
Below is a summary of the most important resources available to your creditors as well as what they cannot do when you are unable to make your regular payments.
The most important thing that you should do, is to at least do something. Do not ignore your responsibility and commitment.
What Your Creditors Can Do When You Are Struggling To Pay
- Cancel your credit facility, card, store account etc - This applies to facilities such as overdrafts, credit cards, store accounts etc. If you do not pay on time, your credit facility can be suspended, which means you will be prevented from using your credit card, store account and so on.
- Goods purchased on HP or instalment agreement - When you have bought goods on an HP agreement, and if you later default on your payments, your creditors can demand that you return the items so that they can then sell these again at a “fair market price” to recover some of their losses.
- Hand your account over to an attorney or debt collector - When handing your account to an attorney or debt collector, they can and will contact you either in writing or by phone, in order to make an arrangement for payments.
- Section 129 letter or Letter of Demand - if they intend taking legal action against you, they must send you what is a called a section 129 letter stating that you are in default and propose certain options, such as setting up a payment plan, reducing the instalment amount etc, so that you can bring your payments up to date. These options should also include a referral to a debt counsellor, as you may qualify for debt review. Creditors cannot proceed with further legal action if this step is not followed. This section 129 letter is mostly delivered by registered mail. Therefore, it is very important that you do not ignore any registered mail that you might receive. You cannot use the defence that you did not collect it.
- Summons - They can issue a summons against you in order to enforce their claim against you. This will be delivered to your home or place of work, and they do not have to hand it to you. Anyone at your address that they have on record can be served with the summons. If you do receive a summons, you have two options. i) Ignore it, in which case a default judgement will be issued by the court against you and that can have serious consequences for you, depending on your circumstances, and ii) Approach an attorney to represent you and assist you to defend the summons. If you have been in default for longer than 20 business days and have not responded to a written notice or summons from the creditor within 10 business days, your creditors can approach the court for an order to enforce the credit agreement in a judgement. A judgement will state that you have not paid your debt and it will reflect on your credit record for 5 years. Furthermore, the judgement will remain valid for up to 30 years or until you have settled the account.
- Your Creditors can Approach a court for a warrant of execution to attach some of your assets - When a judgement is granted, a creditor can apply for a warrant whereby the sheriff can attach your assets, such as your furniture, vehicle etc and sell these to pay your debt. Not all assets can be attached as you have a right to retain what can be regarded as your basic and essential assets for basic needs.
- Emoluments Attachment Order (EAO) (Garnishee Order) - When an EAO has been granted, the creditor can request an employer to deduct their payment, determined by the court, from the consumer’s salary and pay it directly to the creditor until the debt has been settled. Before the garnishee order can be applied you have to agree to it being deducted from your salary. Deductions may not just be deducted from your salary in order to repay a debt, without your permission, except maintenance payments.