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What happens if you cannot pay your debt in South Africa?

If you cannot pay your debt in South Africa, and you miss a monthly payment, this will go on your credit report and can negatively affect your credit score. In turn, this can affect whether or not you will be approved for loans in the future. Even if you are approved for a loan or more credit, you may, because of a missed payment, be approved with a higher interest rate on your loan. 

The reason for this is that a creditor may see you as a higher risk and want to ensure that they get their money before you default on your loan. 

How long does debt stay on your name in South Africa?

Did you know: a late or missed payment could stay on your credit report for 7 years

I’ve missed a debt repayment, now what?

If you’ve missed a payment, a creditor can issue you with a letter of demand, also known as a Section 129 notice, 20 days after defaulting on your account. Following this, a creditor can begin to take legal action against you.

What’s important to note about this notice is that it is the final step a creditor should take before legal proceedings can begin against you. 

“You must be sent a letter of demand (Section 129) and must be given a certain amount of time to pay your debt”- Kavita Kooverjee, attorney at SchoemanLaw INC. 

If you feel like you may miss an upcoming payment, you should immediately contact your creditor to make payment arrangements. This is to avoid negative information being stored on your credit report. 

What happens if I don’t respond or do anything after receiving a Section 129 notice?

The stages of debt collection in South Africa explained:

  1. After not adhering to your credit agreement by either missing a payment or not making the full payment, you can be issued with a Section 129 Notice (letter of demand).
  2. If, after receiving a Section 129 Notice, you do not respond or make alternative payment arrangements, a creditor can approach a court. You can then be served with a summons to appear in court regarding your missed or defaulting payments on your account. 
  3. If the account you have defaulted on is your home or your car, a Sheriff of the Court can then issue you with a warrant of execution (original court order) to repossess your vehicle or home. 

Moku tip: It’s very important to note that the only people who can issue you with a summons or repossess your car is a Sherrif of the Court. You should be very wary of signing any documents just given to you by a debt collector as this is usually done to claim voluntary repossession. 

“I can’t pay my debts, what options do I have?”

If you’ve received a Section 129 notice, you have 10 days to respond to this notice before a creditor can approach a court with the next steps. 

Act now before this happens. Go under debt review. 

What is debt review? 

Debt review, also known as debt counselling, is a debt relief programme that’s available to over-indebted South Africans who cannot afford to make their monthly debt repayments. 

A registered NCR Debt Counsellor will first assess whether or not you are over-indebted, following this, they will work out an affordable, reduced repayment plan for you. This can result in you paying up to 50% less on your monthly debt instalments. 

Before coming to Meerkat, one of our debt review clients was paying a total monthly installment of R10 500. With Meerkat, her new payment plan meant she was able to pay only R6272, saving a R4228 on her debt every month. 

Contact me about debt review >>

Read: How do I get out of debt in South Africa?

Can you go to jail for not paying debt in South Africa?

Radio host, Clarence Ford, interviewed attorney at SchoemanLaw INC, Kavita Kooverjee and during the interview, the attorney made it clear that consumers cannot go to jail for unpaid debt. There are, however, circumstances that can lead to time in jail. 

A few of these circumstances include:

  • If you do not appear in court after being summoned for a financial query.
  • Not paying your taxes to SARS.
  • Failing to pay child maintenance.

What happens if you miss a debt review payment?

If you miss a debt review payment, like with a credit agreement, you are not adhering to the original agreement that you signed. Because of this, the court order that was granted to protect your assets would no longer be in effect. This means that creditors may start legal proceedings against you for missing payments. It also means that your assets such as your home and car may eventually be repossessed. 

Read: What happens if I miss a debt review payment?


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