Retrenched while under debt counselling – what now?

14 June 2019

Undergoing debt counselling can have you feeling empowered, but what if you are retrenched during the process? What happens next?

The National Credit Act (NCA) states that you need to be able to afford consistent repayments if you are under debt counselling. This is so you can pay off the repayment amounts negotiated by your debt counsellor.

If you are unemployed, chances are you won’t be able to afford the process, resulting in your debt situation taking additional strain. However, if you’re able to prove that you are receiving a steady income, either through an allowance or a government grant, you may be eligible to continue with the process.

What should you do?

 Should you find yourself in this unfortunate position, the most important thing to remember is to contact your debt counsellor immediately. While it may be the last thing on your mind as you deal with the mixed emotions that come with being unemployed, it is vital that you make that call early on. Your debt counsellor will need the time to contact your creditors and make the necessary arrangements.

They may also need to contact the courts. Typically, a court order is actioned at inception of the agreement which protects and details the renegotiated payment amounts. Should you be unable to continue with the debt counselling process, or should those amounts need to be revisited, your counsellor will need to contact all parties involved, such as the courts and creditors to inform them and revisit the agreements.

This is stipulated in the NCA and allows counsellors to alter the agreements should there be a change in the consumer’s financial situation.

What are your alternatives?

For some consumers, credit life cover  is what carries them through. This is an amount which is paid monthly towards an insurance that is activated when you are no longer able to pay your debt due to retrenchment or specified circumstances..

For example, if you are retrenched, your debt will not be neglected, and instead, you will be able to claim from this insurance to cover the cost of your debt repayments. If you have such an insurance in place, your debt counsellor could also assist you in claiming from it.

Whether you’re under debt counselling or not, it is wise to protect yourself in the event that you become unemployed. Contact us on info@debtbusters.co.za to see how we’re able to help you do so.