What happens if you don't pay your debt back..ever?

So, have you ever wondered what would happen if you just don’t pay your creditors? We should all try to pay our debts on time and on schedule. However, it can be helpful to know what creditors can and cannot do to recover the debt if there comes a time when you simply cannot.

The National Credit Act, explains:

1- What your creditors can do to force payment

2- They govern the majority of credit arrangements in South Africa.

We examine the most significant of these activities, as well as what your creditors are not able to do if you are unable to make payments. Also keep in mind that the best approach to avoid facing unpleasant consequences is to cooperate with your creditors and, if necessary, select a solution like a debt counselling.

What Happens to Your Debt if You Don't Pay

Well, if you are unable or unwilling to pay your debt and you just ignore it then it is very likely that your creditors will eventually take judgement against you.

Creditors will charge you a fee for defaulting on payments and begin reporting those defaults on your credit history if you cease paying your necessary payments on things like line of credit or overdrafts. They could also take the following actions:

Suspend credit

This holds true for resources like credit cards. Your credit may be stopped if you don't make your payments on time, which will prevent you from using your credit card.

Request the return of the items in the event of an installment sale (HP agreement)

Your creditors may request the return of an item you purchased on an HP agreement, such as a washing machine, if you are in arrears on your payments. The proceeds from its sale will be used to pay off your debt.

Contact you and offer you a plan of action in writing

Your creditors are required to give you written notice that you are in default and offer choices like creating a payment plan, such as lengthening the loan's duration or lowering the amount of the monthly installments, so you can catch up on your payments. Given that you might be eligible for debt review, one of these choices should be a recommendation to a debt counsellor. If creditors wish to proceed with any other steps, including getting a judgement, they must do so after completing this one. Best advice: Never disregard these communications. Respond to your creditors whenever they contact you and explain your circumstances; you might be able to come up with a solution.

Court judgement

Your creditors may ask the court to issue a judgement enforcing the terms of the credit arrangement if you have been in default for more than 20 business days and haven't responded to a written notice or summons from them within 10 business days. A judgement stating that you have not paid your debt will appear on your credit report for a period of five years.

Ask a judge for an execution warrant

When a judgement is upheld, a creditor may submit an application for a warrant allowing the sheriff to seize items like your furniture and sell them to satisfy your obligation.

Only when your creditors have taken specific actions, such as notifying you in writing that you are in default and proposing remedies, sending you a summons if you don't reply, and asking the court for a judgement authorising them to collect the debt, can a judgement be obtained. Upon the entry of judgement, a creditor may request an execution warrant.

Raise your interest rate

Once you start to fall behind on your payments, lenders frequently raise your interest rate. Unfortunately, this causes the account balance to increase more quickly.

Give a collection agent control of the account: Your account might be sold to a third-party collection agency after internal collection departments start contacting you. When dealing with collection agents, many people experience feelings of intimidation and overwhelm. You can get a lot of collection calls, as well as letters warning you that the techniques will get worse.

Get Legal Protection Against Creditors with Debt Review

Debt review is essentially a legal procedure that gives the consumer all the necessary legal protection. At the same time, it gives credit issuers a way to recover debt that doesn't offend customers and actually offers them a solution. Debt counsellors like DebtBusters communicate with all of the credit providers on the client's behalf to arrive at a repayment plan that is both reasonable for the client and equitable to the credit providers.

The debt counsellors will lengthen the payback periods during the negotiation process in order to lower the monthly payments to the credit providers to an affordable repayment level. This gives the consumer the financial relief they desire by ensuring that they have enough money left over to pay for their living expenses, such as rent, transportation, utilities, food, and educational costs, among others. The debt counsellors restructure the debt in accordance with the suggested offer amount is the last stage. Creditors must get a copy of the order and restructure the debt in accordance with the decreed court order.

Can Your Debt be Written Off in Any Circumstances?

Is it possible in South Africa to have your debt forgiven? The solution, in the opinion of specialists, depends on whether or not your debt is prescribed. If all the requirements are met, prescribed debt may be written off. In most, if not all, of the aforementioned situations, your debt won't be forgiven. Find out more about the concept of prescribed debt with our in depth article.

DebtBusters Tips to Avoid Getting your Name Blacklisted:

Notify all your creditors of any change of address

It can prevent you from breaking the law, safeguard your identity, and make sure you receive all of the necessary correspondence. Additionally, it might make it simpler to open a bank account and apply for credit.

Attend to legal documents and letters immediately

The case will be brought to court if the demand letter is unable to resolve the problem, typically as a result of the defending party's refusal to take any action. Remember these will not go away by ignoring them!

Should you be unable to pay your debt, make suitable arrangements with your creditors and stick to your obligations.

DebtBusters counsellors understand that being overly indebted is stressful and frightening. They help you understand your situation (debt review), draw up a solid financial plan (debt management), and negotiate a structured debt repayment plan with your credit provider (debt remedy). We have mandates to negotiate your terms and interest rate with 95% of credit providers. That has allowed us to negotiate our clients' credit interest rates.

Debt counselling is a formal debt solution introduced by South Africa's National Credit Act of 2007

How Debt Counselling Can Help You

It is always much better to make a plan with your creditors to pay them back over time or to approach DebtBusters to assist you to make such a plan. In most cases, the best way to take care of over-indebtedness to creditors, and to avoid repossessions of your property and vehicle, is to apply for debt counselling as soon as possible. The sooner you do something about your debt the better. Get in touch by filling in a call-back form.