Since 27 March 2020 we have entered unprecedented times and this caused uncertainty for all South Africans. We have been confined to our homes and are prohibited by Law to leave our homes, unless to purchase food, medication or to receive medical treatment. Only essential services are authorised to continue operations and other sectors were forced to stop all operations. Although we understand the reason behind the decision made by Government, we are anxious about amongst others, debt repayment…
Some people find themselves in a detrimental financial position because they are only able to earn a portion of their salaries or no salaries at all.These people are left with a very difficult decision:which debt should they pay and which debt repayment should take preference. Some people are unable to pay any debt at all.
The banking sector has come to our aid in this regards and has given us the following options:
1. Credit insurance; or
2. Payment holiday; or
3. Payment arrangements or Debt restructuring.
Since August 2017, all South Africans enjoy the benefit of Credit insurance, which is automatically included in certain short-term credit agreements and even long term credit agreements such as home loans, vehicle financing and credit cards, unless specifically excluded. Most credit agreement terms make provision for a twelve (12) month cover under the policy that may be claimed in the event that a consumer is either unemployed, on unpaid leave or are forced to work reduced working hours. Those who have lost their employment, work reduced hours or are on unpaid leave as a result of the COVID-19 National Lockdown period, should qualify to claim under these policies. A good starting point is to contact your credit provider to confirm the terms of your Credit insurance and to determine if you are covered.
Some banks have offered consumers a Payment holiday for three (3) months. This will at least prevent repossession of assets due to non-payment but you will have to catch up payments at some stage. This could mean payment of a higher instalment or an extension on the loan term. Interest and bank charges will in most cases also remain payable and this will in any event extend the loan term.
Restructuring or payment arrangements can also be made with the credit provider, to reduce your instalment over a limited time but the same as with a Payment holiday, this will result in an extended loan term.
The Government has also announced the COVID-19 Temporary Employer-Employee Relief, payable by the Unemployment Insurance Fund (UIF). To determine if you qualify, an application must be completed. This could take time to process and will not necessarily provide the immediate relief, needed.
Another option is to apply for Debt Review of credit agreements. If you are currently under Debt Review, you are advised to continue to pay in terms of your repayment schedule, to prevent your creditors from proceeding with further legal action, by enforcing the terms of the credit agreement. If you are unable to pay in terms of the repayment schedule, your Debt Counsellor should apply to your creditors for an extension on the repayment term, this is however subject to acceptance by your creditors. You will have to prove a change in circumstances and provide your Debt Counsellor with same. Proof can be a letter from your employer to confirm a decrease in your salary.
Debt, other than credit agreements, should under these circumstances also be paid as far as possible. As with credit agreements other debt such as school fees, if not paid, may also result in further legal action being taken against you. If you have already been handed over for arrear school fees and are paying the debt in terms of an acknowledgment of debt, you are advised to continue to pay in accordance with the arrangement or at least to make other arrangements, should you be unable to pay in accordance with the terms of your agreement. Failure to pay or to make alternative arrangements will result in enforcement of the terms of the agreement and in most cases provision is made to obtain judgment against you, without issuing summons. Once judgment is obtained, execution steps may be taken to attach your assets and ultimately sell your assets to recover the debt.
In light of the above, if it is at all possible, debt should be paid in terms of your agreement. Unfortunately even though most creditors are understanding and have provided short term solutions for the current circumstances, consumers will still have to pay later. Decisions in this regard should therefore not be taken lightly and consumers should consult with all stakeholders before deciding which option to elect.