Reckless lending, increasing interest rates, and a tough economy that has caused many people to lose their jobs are all reasons that consumers are battling to service their debts, says debt counsellor Nobantu Motsweni of Legal & Tax. According to the National Credit Regulator, 46% of 18.6 million credit active consumers have impaired credit records. This means nearly half of South Africans with access to credit have payments are in arrears by three or more months, are slow payers or have had a debt judgment or an administration order granted against them.
If you are caught in a debt trap, debt counselling might be the right way for you to make a fresh start with your finances, says Motsweni. Debt counselling is a legal process that involves having your debt restructured so that you can pay household expenses and still be able to pay off debt at a reduced instalment at the end of the month.
You can enter the debt counselling process by approaching a counsellor who is registered with the National Credit Regulator (NCR). If you are unsure who to use, contact the NCR for recommendations of debt counsellors in your area. The debt counsellor will take care of your debt restructuring process for you, which will culminate in seeking a consent order for new payment agreements in court. The consent order ensures that your creditors stick to the new repayment arrangement and may not take legal action against you. The order also means that you won’t be blacklisted by the credit bureaus and that your goods will not be repossessed.
If your creditors do not consent to the proposals made on your behalf by the counsellor, an application will have to be made to a court to force your creditors to accept less than what they want in line with your financial circumstances.
If some of your creditors have already taken legal action for late or non-payment of your accounts, those debts cannot be included under the debt counselling processes. For that reason, you should apply for debt counselling before debtors take legal action against you, Motsweni advises. ‘Don’t delay if you are a candidate for debt counselling,’ she says. ‘Act now so that you can begin to take control of your life and finances. It is a move that can improve your life immediately.’