What Happens If I Lose My Job While In Debt Review?
Oh No I've Lost My Job
The economy is not doing great and we all worry about losing our employment and source of income.
Even if we live in a household where several people are earning income, a sudden loss of employment can be financially crippling.
For those who are in debt review trying to get rid of their debt, the thought of losing your job is terrifying. It can smash your best laid plans and derail all the progress you have made.
Let’s talk about what might happen if you are in debt review and then get retrenched.
Losing Your Job
No one wants to lose their job. We need money to get by these days and while UIF may give us something to fall back on, it will greatly impact on our ability to make ends meet.
And for those in debt review who have court ordered debt obligations to repay a certain amount each month it can be very stressful.
Another factor to consider for those in debt review is that while others might simply rely more and more on credit during such a crisis, this is not an option for those who have entered debt review (even those who try to leave debt review at this time).
Once you have begun debt review, credit providers wait for you to pay off your debts before letting you use more credit.
If You Know In Advance
If you hear rumblings at the office that something is coming or if your company gives you sufficient warning then you should immediately talk to your Debt Counsellor.
They can reach out to your credit providers and apprise them of what is coming. They could even go back to court (which would admittedly create some costs) and ask for an order delaying payments.
Most credit providers are prepared to consider a reduced payment plan for a short time or a skipped payment or three if they know about your challenges in advance and get corroborating information to show that your need is real (eg. a notification from your employer).
‘Most credit providers are prepared to consider a reduced payment plan for a short time’
In such a case, it might be possible for the Debt Counsellor to ask nicely and the nice credit providers to make a plan for you. They may also be able to talk you through any insurance claims that can be made (depending on what policies are in place).
Note: not all credit providers might agree and some may make outrageous demands or just refuse and plan to start their old collections methods. In that case, you and your Debt Counsellor will have to work with your attorney to try ask a court to force them back into the debt review (hopefully by then you will have work again).
If It Is Sudden
If you find out last minute and the Debt Counsellor cannot talk to the credit providers in advance it can result in your credit providers not cooperating. It is somewhat likely that one or more of your credit providers may decide to try duck out of the debt review process and start new legal action against you.
While you can defend this, as mentioned previously (using Section 86(11) of the National Credit Act), it can be stressful.
But even if you get last minute notification you should still talk to your Debt Counsellor about how you can adjust your budget, make changes to reduce expenses and possibly make part payment towards your debts (or claim against insurance as we will discuss next).
Do not, just stop paying your debt review instalment and not tell anyone. That will just cause even more problems.
Best Case Scenario
If you are able to apprise your Debt Counsellor of the problem and get some advice in advance, that is best.
You hopefully will be able to adjust your spending to match any UIF payments. Also, with advanced warning they can assist you in speaking to your insurance provider about your credit life and/or retrenchment cover.
Many Debt Counsellors put their clients in touch with FAIS compliant advisors who help consumers entering debt review to get cover for death disability and credit life cover. If you have done so then a claim can be made and some policies will cover debt review payments for 9 months or more while you look for work. Some policies even cover school fees and other costs during such a stressful time.
As with all insurance, if you never need it, you may feel it is money wasted but if you do need it and it helps you through a rough patch you will cry tears of joy that you had the policy.
Then, hopefully during this time, while you have arrangements for reduced payments or have insurance cover your debt repayments, you are able to focus on getting a new job or starting your own business to bring in income. Then you can resume your debt review obligations and continue your journey to getting out of debt.
Worse Case Scenario
If, unfortunately, you do not have insurance or if your credit providers all refuse to make arrangements (which they do not have to) things will get complicated and stressful.
If you have a history of poor payment, your credit providers may not want to make arrangements with you or may feel that you simply will not honour them. They may prefer to try push things back into the old collections process, with all its calls, letters, sms and even legal action.
You may find that you have to stop payments towards your debts entirely (it is best to always try and pay your creditors something, according to your household monthly income during this time). This may effectively bring your whole debt review crashing down.
While it might be possible to defend legal action at court level by pointing to the fact you were in debt review, if you have not been trying to pay something during this time or if you never bothered to tell your Debt Counsellor and credit providers what was happening, it is unlikely that a court will side with you. And there are costs to try and defend such matters.
All the power shifts to your credit providers and they will get judgments and pester you for payments for years to come. You will also still have the debt review status on your credit reports until your debts are settled and will be forced to repay what you owe. Only once this is done will you re-enter the credit market (if you ever want to deal with these nasty credit providers again).
It is a world of stress and pressure like the old days before you entered debt review.
Talk To Your Debt Counsellor
If you are worried about possibly losing your job one day then talk to your Debt Counsellor about FAIS compliant insurance brokers or suppliers. Ask if you already have cover for such events.
Get the info now, long before you might even need it. Hopefully, you never need it.
If you see trouble brewing at work or in your business then discuss the matter with your Debt Counsellor. They will be able to help you do what you can with the resources you have available to you.
Even if things go wrong suddenly, reach out to your Debt Counsellor and discuss your options. You may have to face some stress, obviously, but perhaps there are ways you can reduce your stress about your budget and debts.
Your Debt Counsellor will help you do what you realistically can and many nice credit providers will try and voluntarily assist you with some leniency.
While things will still be tricky this will enable you to rather focus on finding a new job.