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Getting into debt is hardly a wise thing to do. However, some people can’t help situations in which they may have lost their job or had to purchase costly equipment for their business. Others sail into debt simply because they have never learnt the process of financial planning.
However, once you are in the trap of debt you need to either find a way to pay up or face the prospect of the collection process. Debt collection is a serious business. For those choosing to skip payments or usefully ‘forget’ their debt, be prepared – because consequences can be severe.
Herewith the generic facts:
Your credit report
Your credit record reflects your payment history for a period of 24 months. Each month you default on a debt payment it reflects on your credit report.
- This information is used by credit providers to ascertain if you are a risk; can they trust you and can they afford to enter into a credit agreement with you? In other words, it’s going to get more difficult to borrow money.
- The more of a risk you present, the higher the interest rate you are required to pay.
- Always check your credit record before attempting to apply for credit, if only to ensure you have not been the victim of credit fraud.
Legal action begins
Once you have defaulted on payment and been listed on the credit bureau, legal action can be instituted against you. This will begin with a phone call from the creditor to hopefully extract a promise from you to pay the account. These phone calls will continue until a point is reached where the creditor realises you are not able or willing to pay. In terms of the Debt Collection Act, you may only be contacted between 07:00 and 21:00. After the phone calls, comes the Letter of Demand which must clearly state what the claim is for and how much is being claimed.
The Notice arrives
The Letter of Demand or Section 129 Notice will be delivered via Registered Mail to your “domicilium citandi et executandi” – which is a rather garbled way of saying where you live. This is the address you will have given your creditor as the place where you may be contacted by post. Onus remains on you to alert your creditor of any change to this address should you move house. If you think that cunningly moving house without informing your creditors of your change of address is a clever idea, be assured that they will find you – they are highly experienced at tracking debtors. That’s the job of debt collection.
Your three options
- Settle the debt with the debt collector as soon as possible
- Initiate a dispute with the creditor
- State clearly your desire to pay the debt but engage with the debt collector to restructure the debt
From the moment the first 129 Notice is sent to your address, you have only ten days to engage with the matter as optioned above. Even if you have moved from that initial address, and you therefore don’t receive it, the Notice is still considered lawfully served in terms of the National Credit Act (NCA). Updating your change of address with creditors is vital, and such documentation must be kept as proof of communication.
The Summons
If you don’t act quickly on one of the three options, the debt collector will proceed to a summons. This is delivered by the Sheriff of the Court to the same address whether you are there or not. This process can be repeated three times if no response is forthcoming from yourself. You should now acknowledge the debt, consent to Judgement, and consent to the creditor application for judgement against you.
A date for a hearing
At this point you will complete a section on the summons document indicating your Appearance to Defend. This you hand in at the Clerk of the Court. The Court will then issue a hearing date on which you can state your case in Court. However, if you fail to respond to the summons then the creditor can apply for a Default Judgement against you. This is an unhappy result because then your creditor is entitled to attach your car or your house for sale to settle the outstanding debt. Any outstanding debt may even result in a Garnishee order against your salary, forcing your employer to ensure that you pay your bill – a very unpromising situation with regard to your future.
Your rights
In amongst all this difficulty, you have some rights – but rights that pale against the rights of the creditor who is entitled to be paid.
- You must be notified in writing before a creditor institutes legal action.
- You’re entitled to visit a Debt Counsellor. You will have ten days to apply for debt review / debt counselling.
- Once debt review has been applied for, no legal action can be taken until a court or debt counsellor has found the consumer is not over-indebted.
- However, the debt collection litigation process can become complicated, drawn out and costly if a debtor decides to defend the matter.
LegalTrack – how we do things differently
At LegalTrack we work with real people with real problems and therefore we apply a highly considerate and respectful approach to debt collecting. We understand that we need to be firm, but we are also aware that to negotiate successfully with an individual who is already in a difficult financial position, we need the skilful combination of empathy and experience, backed by well-honed communication capabilities. Our modus operandi is simple, direct, efficient:
- Our first contact is via an SMS.
- This is followed by a phone call to begin the negotiations on how the debt will be paid.
- All payment arrangements/negotiations are confirmed via letters, emails and text messages.
- Our promise is to constantly keep contact with our debtors in terms of all arrangements.
- Any legal action is considered the last option.
