Forfeiture requires an application to the High Court (which involves hiring the services of legal professionals), and essentially means that anything the consumer owns that is of value would be sold to pay off existing debt.
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A Fin24 reader who has been unemployed during the Covid-19 pandemic is struggling to repay his debt. Turning to an expert, he wonders what his next step should be.
Unfortunately, the continued but varied lockdown levels hit me very hard. I have been unemployed for most of the past two years, only entitled to an R350 grant. I have the following debt to repay.
I have made sure to pay this off every month since I took the three month vacation period during the pandemic.
At the end of September 2021, it was the first time that I could not pay my car loan. I contacted the bank, but they said they couldn’t help me. I have been paying my car since 2016, and this will be my first missed payment. I offered a smaller amount, however, that the vendor disagreed with.
I could only offer R100 this month, which I paid for.
Retailers are not happy with this.
2 x other loans
I didn’t pay them for a few months after the first lockdown.
Both have insurance attached to them. These insurance companies gave me the tour with no communication to come. But lawyers contact me frequently.
2 x credit cards
I set up payment terms and paid for them every month.
I don’t know if I will be able to pay them at the end of October 2021.
What do I do? Should I be kidnapped? But then what happens with my house and my car?
Benay Sager, COO at DebtBusters, respond :
In this case, the consumer is facing financial difficulties, and unfortunately it is the case for many consumers in South Africa since the blockages started in 2020. This consumer seems to have a good understanding of his debt situation and wants to repay. their debt, both of which are great places to start. When there is intent, there are usually a few options available.
Generally, the range of debt management solutions available to the consumer depends on the following factors:
- Debt size (i.e. how much money is owed)
- The composition of the debt (i.e. home loan, personal loan, credit card or a combination of these)
- Consumer affordability (i.e. how much the consumer can afford to repay for debt repayment)
- Consumer assets (what the consumer owns that can be sold to pay off unpaid debt)
The combination of these factors determines the best options, from debt consolidation to sequestration. Usually, debt counseling is a great place to start for consumers with a source of income, as debt counseling works on the premise that consumers pay back what they can afford.
Having said that, given that the consumer has indicated that their income is limited, overall we believe that the consumer would have three indicative options:
1. Sell their vehicle to pay off some of the debt. This option would only work if the current value of the vehicle is greater than the unpaid amount owed, thus causing excess money for the consumer if they sell the car. It would be best if the consumer could have the vehicle appraised first, so that they can determine if it is a genuine option.
2. Apply for escrow. Forfeiture requires an application to the High Court (which involves hiring the services of legal professionals), and essentially means that anything the consumer owns that is of value would be sold to pay off existing debt. This is a pretty extreme solution for many consumers, but if it is successful, it allows the consumer to start from scratch.
3. Work with each credit provider to restructure debt. It can be intimidating when a consumer does it themselves, especially in this case, as there are at least eight accounts involved (maybe more). The best course of action is to bring in a debt counselor to see what options are available to restructure existing debt.
The first two options can be intimidating and may not lead to the best outcome for the consumer, especially if they have family or dependents. Therefore, we recommend that the consumer contact a reputable debt counselor to explore option three – this is particularly relevant as the consumer has implied that they have paid off their debt (even in the absence of their previous income levels. ), so this is an option that should be explored in our opinion.
Questions can be edited for brevity and clarity.