What If You Lose Your Job While In Debt Review?
Debt review is an amazing process that helps stressed consumers enjoy restructured, more manageable monthly debt repayments as they pay back their credit providers over time.
But what happens if you were to lose your job while in debt review?
Can you stop paying and hope nothing bad happens?
Does the process automatically fall apart?
Losing Your Job
It is something we all worry about.
Instead of getting our regular income, we may end up getting called into the boss’s office for a dreaded bad news conversation. One that ends with us without a job and without pay.
As the economy goes through ups and downs, it is not impossible that a seemingly secure job is lost. Suddenly we are scrambling to cover the basic expenses like food and electricity, never mind debt repayments.
So, what happens if you do lose your job?
Planning Ahead: Saving
Realising that this is a possibility, there are a few precautionary steps you can take right now to help cushion the impact of any unexpected job loss in the family.
At present you may have multiple people in the family earning and contributing towards monthly running costs, and maybe even debt repayments. If one person in the family loses their job it can have a serious knock-on effect.
This is why it is recommended to have some funds set aside as savings, in case of just such a scenario.
Now, before entering debt review, you were probably using all available credit just to stay afloat each month. But once you enter debt review that changed.
Your Debt Counsellor would have dismantled your monthly budget and planned for you to save. Especially to save towards annual expenses such as car licenses, school fees, vehicle servicing, tv licenses (remember those) or a trip to the doctor for an annual checkup.
It is important that you do not ignore your budget and stop setting aside those funds each month. You need a cushion in case of unplanned events. Over time, you want those savings to add up to enough to help you weather a disaster, such as suddenly losing your job.
Planning Ahead: Insurance
Another thing your Debt Counsellor, financial advisor or FAIS insurance broker would have spoken to you about is taking insurance for this situation, sudden job loss or inability to do your work.
Some credit products have insurance built in that covers these situations, but you may also have exchanged that expensive cover for cheaper cover when you began debt review.
If you do not already have such cover or want to know about it, you can start that conversation with your Debt Counsellor, who will put you in touch with the qualified people to talk to.
This insurance can cover your debt review instalments for several months, if something unexpected happens.
We Have To Let You Go
No doubt if this situation was brewing at work, you may have already contacted and spoken to your Debt Counsellor about your concerns. But what if you suddenly get told you have been retrenched?
The day this happens is the best time to call you Debt Counsellor.
They need as much time as possible to (1) evaluate your situation (2) put steps in place to try get you temporary relief, or make insurance claims and (3) offer you advice on working with your reduced budget.
There are a few possibilities that can happens next. Let’s discuss them.
Evaluating Your Situation
Your Debt Counsellor will set aside time to talk to you about what your realistic household income situation will look like.
It’s possible that others in the home are still earning, and with some adjustments you could make a reduced repayment. You may be able to claim from UIF and get some income in that way.
You may be able to make swift changes to your monthly budget, e.g. move out of your current residence, rent out a room in your home, sell assets or launch your own new business or find part-time work. These changes may allow you to make some sort of payment; this will determine what comes next.
Whatever the case, your Debt Counsellor will message your credit providers with the news and make realistic, informed suggestions to try and keep your debt review going, if possible.
All Your Credit Providers Agree To Help
Your Debt Counsellor will ask you for some information (like a letter from the company with the bad news) and send it on to your credit providers, asking them if they would be willing to make a temporary adjustment to the court ordered repayment plan.
‘Your credit providers do not have to accept’
Your credit providers do not have to accept any changes to the original court order, but if they do, they may be willing to allow a month or two, or even three months, without any payment, or with a drastically reduced repayment.
This process (often called the 17.3 process) depends a lot on what the credit providers are willing to do to help you.
Alternatively, you may have taken out insurance policies or have credit life policies on the accounts that will cover the debt repayment for a while. Some policies will cover as much as a full year.
Some of Your Credit Providers Agree To Help
It might happen that only some of the credit providers are willing to help you out, and give you some leeway in this situation. These credit providers may prefer to keep dealing with you through debt review and give you a chance to get things back on track.
But other credit providers may want to start new legal action against you, and take you to court to try get their money back, this is their legal right. In that case, you will need legal assistance to do what is called an 86(11) defence. More about that later.
In the future, remember who helped you out and who did not. You may want to take your family and company’s future business to those companies who helped you out, and avoid dealing with those who did not offer assistance. The good guys should be rewarded.
This mixed situation may mean that you end up paying a little something, or perhaps nothing, to some accounts for a while and later, once you are reemployed, try to catch up on payments. It can be hard to know or guess exactly what will happen next, but you may have some time to try work things out.
Once you are working again, you may be in the situation where some accounts are still under debt review and others are caught in legal battles.
None Of Your Credit Providers Agree To Help
It may happen that even though your Debt Counsellor asked nicely and provided the credit providers with proof of your situation, all your credit providers may walk away and start new legal action against you.
If that is the case, you will probably have to deal with several legal matters to try and force the credit providers back into debt review once you are able to pay again. This is called the 86(11) process and is part of the National Credit Act, designed to help.
In the meantime, you may try to make some smaller payments to the unhappy credit providers, even though they are nasty and do not want to help. This shows good faith on your behalf. You are doing what you can; this can be helpful later when things go to court.
If you are not able to stick to the debt restructuring court order for debt review, then your credit providers are allowed to tell you that they are walking away from the debt review. They will send notices (to you, the NCR and your Debt Counsellor) and then will start up their old collections processes.
You can expect SMS’s, WhatsApp’s, calls, letters and eventually court summonses. As with any summons, it is best to try to defend the matter rather than just hope it will go away. You may need legal help with that, or your past Debt Counsellor may offer some assistance.
If you are not paying your debt review that means you are not paying your Debt Counsellor either. Keep this in mind when dealing with them, please be nice to them since they would be helping you for free.
Going To Court
If a credit provider sends you a summons because you could not stick to the original debt review court order, you have the option to defend the matter.
This would involve submitting court documents to explain your side of the situation and even going to court to defend yourself (or paying an attorney to do so).
Part of your defence would be to explain how you lost your job, what steps you took to try and negotiate with the credit provider(s) and how much you were able to pay them. It always looks good if you were paying them at least a little.
If you have since got a job, you can show how you have increased your repayments to catch up. If you have not yet got a job, you will have to ask the court to give you more time.
Possible Outcomes:
The court may or may not decide to force the credit provider to go back into the debt review process.
If you have been making some payments and are likely to carry on making payments, it is more likely the court will tell the credit providers to leave you alone, and just put things back into debt review.
You can then ask the court to make the mean credit provider who made all this nonsense pay for all the legal costs you have had defending the matter. That’s fair.
or
The court may feel that it is not right to force the credit provider to put the matter back into debt review. They may grant a judgment against you, and the credit provider can then use that to demand payment from you.
The funny part is that because your debt review sets out exactly how much you have available to pay them, you may end up paying them the same amount as before (but maybe with higher interest). It’s a lot of stress and legal costs for them to make you pay the same available amount at higher interest.
Alternatively, it might result in less money being available to them (in the case of a car or home being sold and you having to rent instead). They can only take what you can realistically cover.
We Hope It Never Happens
Debt review relies on you sticking to the court order and making regular monthly repayments.
If you, or someone in your household loses their job, it can be super stressful and can destroy your debt review.
If you have planned ahead and have some savings or insurance, you may be able to weather the storm for a month or two.
Regardless, you are going to need the help of your Debt Counsellor. They do not have super powers and cannot demand that credit providers cooperate, but they can explain your situation and ask them nicely for a period of smaller or even no repayments.
Depending on how all your credit providers respond, you may have some extra stress or even legal expenses (at the exact moment you have no funds). Still, it is always worth defending a matter and telling your side of the story.
If you can show the court that you have tried to keep up payments as best you can, and maybe even have found new work, they may simply make the credit providers pay the legal costs and put the account back into debt review. If the court thinks there is no chance of you actually paying the credit provider, they may grant a judgement (which could impact your car or home). This is up to the court.
So, if you get bad news about your job, please immediately reach out to your Debt Counsellor. They will help you through the tough times ahead and offer you practical and realistic advice to deal with this tricky situation.
