What happens if you miss debt payments in South Africa – and what you can do about it

Nobody plans to fall behind on debt repayments, but sometimes it’s unavoidable.

If you’re overwhelmed by debt, you might wonder what happens if you simply stop paying your creditors.

Of course, it’s best to pay your debts on time, but if you’re struggling, it’s important to know what creditors are legally allowed to do – and what they aren’t. Knowing your rights and options helps you take control of your finances before you get into deeper trouble.

The consequences of unpaid debt

Falling behind on debt repayments in South Africa can lead to serious consequences that go beyond financial stress.

At a basic level, unpaid municipal bills could result in your electricity or water being cut off.

Defaulting on payments can also negatively affect your credit score, making it difficult to obtain loans in the future.

You may have to indefinitely put plans to buy a home or work in a particular sector on hold – unless you take proactive steps to safeguard or restore your financial reputation.

What happens if you ignore your debts?

If you can’t pay, or simply ignore your debts, your creditors will likely act against you.

They will charge you a fee for missing your repayments, and defaults will be noted on your credit record.

Creditors can also take the following actions.

1. Suspend your credit

Creditors can suspend your access to credit facilities such as overdrafts and credit cards, and prevent you from using them until you’ve made payment.

2. Request the return of items bought on credit

If you’ve purchased an item on a hire purchase agreement, for example a washing machine, your creditor may ask you to return it if you’ve fallen into arrears.

3. Repossess financed items

If you’ve bought items on credit, such as vehicles or appliances, your creditors can repossess the goods to recover outstanding debts.

4. Issue a section 129 notice

In terms of the National Credit Act (NCA), creditors must send you a section 129 notice (a formal letter of demand), informing you of the default and proposing ways you can remedy the situation, including the option of applying for debt counselling.

5. Initiate legal proceedings

If you don’t respond to a section 129 notice within ten business days (usually), creditors may begin legal action to recover the debt.

You should try to avoid this scenario, which could see you facing serious legal action. Contact your creditors and discuss a possible repayment plan – for example, extending the term of the loan or lowering your monthly instalments – to allow you to catch up on your payments. 

They may also recommend debt counselling as a solution if you’re overindebted.

6. Have a summons issued

Your creditor may have a summons issued if you fail to respond to the section 129 notice. You must defend the summons or a judgement will be issued against you.

7. Obtain a court judgement

A judgement can remain on your credit report for five years, affecting your ability to access further credit, and perhaps even preventing you from buying a car or home.

It’s therefore vital that you respond to correspondence from your creditors, rather than ignoring it and hoping the problem will disappear.

8. Enforce the judgement

Once they’ve obtained a judgement against you, your creditors can apply for a warrant of execution, which authorises the sheriff of the court to attach and remove – and subsequently sell – your assets to settle the debt.

9. Raise your interest rate

If you miss repayments, your credit score will typically decline. As a result, further credit may become unavailable to you, or your interest rates may go up, meaning credit becomes more expensive.

What creditors can and can’t do under the NCA

The NCA governs most credit agreements in South Africa, outlining what creditors are permitted to do when collecting debts and which actions are prohibited.

As outlined above, if you can’t make your payments, your creditors may:

Issue a section 129 notice once you’ve been in arrears for at least 20 business days

Take legal action if you haven’t responded to the letter within a specific period – usually ten business days

Obtain a court order to recover the debt or repossess your assets if you haven’t taken steps to remedy the situation (including the option of applying for debt counselling, also known as debt review)

However, your creditors may not:

• Use intimidation, harassment, or misleading tactics to collect debts
• Repossess your assets without a valid court order
• Continue collection efforts if you’re under debt counselling, which prevents them from taking legal action against you

To find out more, read our in-depth guide to what debt collectors can’t do.

The involvement of debt collectors

If your creditor’s debt collection department has little success recovering debt owed by you, they could potentially sell your unpaid debt to a debt collector.

Debt collectors are often very persistent in their attempts to collect monies owed, which can be very stressful for you.

However, in South Africa, debt collection practices are regulated under the Debt Collectors Act 114 of 1998, and legally, debt collectors may not harass or intimidate you.

Can you go to jail for unpaid debt?

No, you can’t be imprisoned for simply failing to repay debt in South Africa.

However, under specific circumstances, failing to comply with a court order related to debt could lead to arrest.

Being in contempt of court, and wilfully disobeying court orders related to debt, may lead to imprisonment.

Can your debt be written off in South Africa?

In specific circumstances, debt may become unenforceable because it has prescribed.

Under South African law, most debts prescribe after three years if no payments or acknowledgments have been made, and the creditor hasn’t issued a summons.

However, certain debts, such as municipal debts and government taxes, have longer prescription periods. 

Tips to help you avoid the consequences of unpaid debt

Notify your creditors of address changes

Always keep your creditors updated if you change your address to ensure you continue to receive any important information, including legal documents, sent to your home.

This will also help to safeguard your identity and financial records, and help when you open a bank account or apply for credit.

Respond to legal letters immediately

Never ignore a legal letter.

If you receive a letter of demand but ignore it, the matter may end up in court. Responding quickly can help you avoid legal troubles and costs.

Remember, the problem won’t go away if you choose not to act.

Can’t pay your debt? Make arrangements and stick to them.

If you’re unable to pay your debts, you’ll need to negotiate a new repayment plan with your creditors, if possible.

At DebtBusters, our debt experts can assist you with this. We help you to:

• Understand your financial situation
• Keep to a simple monthly budget that won’t strain your finances further
• Negotiate with credit providers on your behalf

We have mandates to negotiate with 95% of credit providers to restructure your terms and lower your interest rates, helping to reduce your total debt.

How debt counselling can help you today

If you’re overindebted, consider seeking the guidance of a registered debt counsellor.

At DebtBusters, we can help you by drawing up a new repayment plan that consolidates your debts into one affordable monthly payment. This will free up cash for everyday expenses and reduce your anxiety about managing your finances.

In addition, debt counselling can:

• Protect you from direct communications from your creditors
• Lower and freeze your interest rates
• Prevent creditors from seizing your assets

The sooner you speak to a debt counsellor, the sooner you’ll get expert support – and realise you don’t have to face your financial challenges alone. Get in touch by filling in our call-back form.

Debt counselling provides immediate relief and allows you to imagine what a debt-free financial future might look like.

Why choose DebtBusters?

DebtBusters is South Africa’s leading debt management company, and a nine-time winner in the National Debt Counselling Practice category at South Africa’s annual peer-reviewed Debt Review Awards.

We’ve helped thousands of South Africans overcome debt stress through professional, empathetic service. With a track record of negotiating better terms with 95% of credit providers, we offer you a path to regaining financial stability.

Don’t wait until your debt becomes overwhelming. Take control of your financial future today!

Fill in our free call-back form and start your journey towards financial freedom now.