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Oh Oh, Now What?

So, you missed a debt review payment…bad move. You know it, your Debt Counsellor knows it and 100% your credit providers know it.

So, what happens now?

Missing a payment is a disaster

There are no two ways about it: missing a debt review payment is a total disaster.

The entire debt review process is based on helping consumer who were paying inconsistently due to a number of factors to become regular payers. The idea is to ensure monthly debt repayments to settle the debt in a way that consumers can actually manage.

A lot of effort goes into this. A Debt Counsellor works with the consumer to review their budget and adjust their spending. Credit providers make huge concessions and cut out fees and charges and lower interest rates, all in an effort to make things realistic and manageable for the consumer.

the consumer should be able to make regular monthly payments throughout the year

Once all these arrangements are made, a Magistrate looks over the proposals and the consumers’ ability to pay the new monthly debt repayment amounts. Once satisfied, the courts make an order, and the new payment plan is put into effect.

What this means, is that the consumer should be able to make regular monthly payments throughout the year. So, missing a payment should not happen, ever.

Old Habits Die Hard

Most consumers who enter debt review are coming out of a very hard financial time in their lives.

Many have had to play the “who will get paid this month” game. For a long time, it might have been whichever credit provider’s collections team shouted the loudest, or were the most persistent or frightening.

Maybe there was a pattern of using one credit providers’ credit to pay other credit provider, “robbing Peter to pay Paul” as they say.

If this went on long enough it eventually become normal. But these were bad habits and did bad things to your credit record and were not fair to those who loaned out the money.

When entering debt review it is time to end these bad habits, and start developing new, better habits, like paying all your debts every single month.

Are You Just a ‘Bad’ Debt Review Consumer?

We will look at legitimate reasons why consumers may miss a payment or short pay, but before we do that, it must be said that some consumers fall back into bad habits from the past and make poor financial decisions, thinking they can “get away with it”.

If you skipped a payment or short paid when you could have made a plan then… you are a bad consumer.  If you decided to give money meant for your debt review to a friend, instead of your credit providers, that was foolish. If you decided you needed a holiday, and just used the money to go visit family…bad move.

Sorry, but it’s true and if this is the case, then it is going to unfortunately come back to bite you.

Hopefully you are not a ‘bad’ debt review consumer, and perhaps things beyond your control happened, and you are now in the unfortunate situation of having missed a payment, it does happen.

Why might Someone Miss a Payment?

Life is unpredictable.

Who could have predicted that Covid-19 would lead to a global lockdown and destroy so many businesses?  Many families’ lost income and faced hard times over the last few years as a result. It also hit those in debt review, although the industry rallied together and made plans, it just demonstrates how things can change suddenly.

Sudden changes in income due to retrenchment or an unplanned medical expense can derail the best laid plans. You may have had a car accident and your means of transport is suddenly removed (and with no access to new credit that can be tricky).

There are many legitimate reasons why you might miss a payment.

Bad things unfortunately happen to good people.  Depending on how you have planned for the unexpected, you may now need to deal with the fallout from a missed payment.

The Value of Insurance

You never need insurance till you need it.

Fortunately, over the year, the needs of those in debt review have been noticed, and several brilliant insurance providers have stepped into the gap to help out.

These days, you can get specific cover for your debt review payments in case you are retrenched or disabled temporarily or permanently. Some pay these repayments for a whole year while you are looking for a new job. You can get cover that will allow you to go out and get a new (2nd hand) vehicle if yours is written off, not just pay the balance off to the credit provider.

Insurance like this has saved many consumers a world of pain, as they are able to reduce the impact of such unexpected events.

If you do not already have insurance like these in place, then why not discuss options with your broker or ask your Debt Counsellor which service providers or brokers you can chat to?

Did You Tell Your Debt Counsellor It Was Going To Happen?

With advance notice of an upcoming payment issue your Debt Counsellor may have been able to reach out to all your various credit providers and discuss the problem with them. This can help a lot.

While credit providers do not have to cut you any more slack (they have already done a lot and there is now a court order about how you must pay), they might. Many of the credit providers understand that the unexpected can happen. They might be willing to make a plan.

If your Debt Counsellor was given enough time and was able to give proof of the issue to your credit providers (sending real proof of the issue is vital) then maybe, just maybe they will allow you to adjust the payment plan.

For example, if you are going to be paid late (or work on contract and payment will only come in later than the “usual” date each month) and you have a letter from your employer showing that, this information can be shared with your credit providers. They might then be willing to wait a few extra days/weeks for their money instead of freaking out at the end of the month.

The key is, did your Debt Counsellor have enough time to try make a plan, and just how generous are the credit providers feeling?

Results may vary.

The Dreaded 86(10)

In the industry we call the letter from a credit provider which says they plan to leave the debt review process a 86(10) notice (Section 88(3) can also be used in cases where the court order is in place).

We also call them: “Termination” letters.

That sounds scary.

It is scary, because these notices indicate that things just got a whole lot more complicated and tough times are ahead.

Debt Counsellors hate them because they normally mean a whole bunch more work that may come to nothing, despite their best efforts. Consumers should fear them and take them seriously, because they herald bad news.

It is important to note that a copy of such a notice must be sent to the NCR, Debt Counsellor and consumer or they are not valid.

86(11) To The Rescue

The National Credit Act (NCA) sets out, that if a credit provider wants to withdraw from a debt review matter, then the consumer (and their Debt Counsellor) can ask any court that is approached by the credit provider later to send them back to be part of the debt review again.

This is done in terms of NCA Section 86(11).

So, the law makers thought that this might be needed and made a provision. Think of it as a safety net for those who genuinely are doing their part and sticking to the debt review. Still, the court would have to be shown proof of your good participation, and any reasons for a default, and they need to rule in your favour for it to help.

‘a safety net for those who genuinely are doing their part and sticking to the debt review’

It is a credit providers right to “terminate” in some circumstances, and it is also a consumers’ right to have the matter put back into debt review, in some circumstances.

What Can Happen After A Missed Payment

A credit provider who sends out a notice, and then starts their collections process again (in terms of 88(3) or 86(10)) is simply doing what the law allows.

They want to get their money and they may feel that the debt review is not working because you missed a payment.

That’s fair.

So, they will likely send you some correspondence, and then roll out all the usual collections methods. This means you will start to get calls, sms, whatsapps, emails and phone calls. The old familiar stress all over again.

‘you will start to get calls, sms, whatsapps, emails and phone calls’

They may look at your account and consider how much you should have paid if you never went into debt review at all. This relates to your original contract with them. They may then start to chase you for a lot of money, all in one go.

If they don’t have any joy that way, they will likely let their lawyers start legal proceedings. This means a summons and application for a judgement against you.

If you have an asset involved (like a car or house) they might ask the court to attach such assets so they can sell them on auction. If that happens, it will not be great, you could really face hard times, and end up losing the asset and still owe them lots of money, then they will chase you to pay for years (up to 30 years).

What Can Your Debt Counsellor Do For You?

Your Debt Counsellor will be disappointed that things have not worked out according to their well laid plan, but they will try to help.

Obviously, if you missed payments because you are just refusing to pay, this might result in the Debt Counsellor withdrawing their services because of your non-cooperation. But when that’s not the case, they will try help.

Your Debt Counsellor will try and assist you, but remember that credit providers are legally allowed to take these actions.  So, your Debt Counsellor can only ask your credit providers nicely, and where necessary, help you defend the matter at court with some background information. You can ask your attorneys (maybe the ones who helped with your debt review) to help, for a fee.

‘some of your credit providers…may decide they want to carry on in the debt review’

It might be, that some of your credit providers are more understanding than others, and may decide they want to carry on in the debt review despite your missed or short payment. If so, your Debt Counsellor will do some math and send a revised payment plan.

Maybe that plan will be to catch up the missed payment slowly or in a few payments. Or maybe the revised plan will require you to pay the debts back over a slightly longer time period.

If the credit providers are happy, then you pay those who want to carry on via debt review (via your PDA as before) and you have to make a plan with those who have left the debt review arrangement.

This may change the amount you pay, and you may have to make even more drastic life changes to make those payments, and your debt review payment.

It will be hard, much harder than before.

Try Make A Plan

If possible, you must try your hardest to never miss a debt review payment.

If you see trouble brewing, speak to your Debt Counsellor right away. Give them time to talk to your credit providers.

Even better, work with them to look at what you can do, instead of missing a payment. It is time to think big and make big moves to stay on track if possible.

If you have a problem with transport, you can look at ways to use public transport while saving funds towards repairs. If it is a big expense, you can discuss what assets can be sold to help cover costs. Or you might take the initiative and ask family or friends to help you out.

Maybe you can discuss a reduced payment, rather than a totally missed payment. If you have insurance in place, it may also help.

Whatever the case, recognizing a problem earlier and making plans, will help reduce the impact.

Things Might Fall Apart

If you have missed a payment, then you need to realise that things could fall apart totally, and your Debt Counsellor, while helping, cannot change the law, they can only work within the law to assist you.

Credit providers are totally within their rights to consider dropping out of the debt review (and maybe even going after your assets), it’s up to them.

A good record of payment over time, or even being ahead on payments can help motivate them to cut you some slack. Giving concrete proof of any coming payment problems, or whatever already happened, can also convince some to stay in the process even if others don’t want to, that can help a little.

If you and your Debt Counsellor can make a decent proposal to catch up a missed payment, that may also be a deciding factor.

‘a missed payment will complicate your life drastically and can derail all the progress you have made’

But make no mistake, a missed payment will complicate your life drastically and can derail all the progress you have made during your debt review. It is not to be taken lightly.

Please do whatever you can to avoid ever missing a payment.

Note: To read the rest of this issue of Debtfree magazine click next/previous