COLUMN: Ignoring debt will not make it go away

2016-02-16 06:00

Debt has become a huge problem in South Africa, especially with the interest hike and unemployment – it is estimated that over 9m South Africans are over-indebted.

It has been reported that half of South Africa’s workforce is currently struggling with debt repayments, with a staggering 6000 vehicles and 2000 homes being repossessed monthly.

25 000 people are in danger of losing their homes. And don’t even mention looming retrenchment and unemployment.

This is an alarming state of affairs as we are entering 2016.

What is even more worrying is that we live in a culture in which consumers think that ignoring the issue will make it disappear. The reality is that it will only lead to undesired results, such as judgements and an unnecessary bureau listing.

The question is, if you find yourself in debt, what options do you have to rectify your situation and how can you move closer to obtaining financial freedom?

Your first step is recognising the signs that you are in debt: don’t be in denial and accept that you need help.

Examples of behaviours are regular short-term loans, pawn shop visits, using credit cards to buy basic necessities like food or even using your credit cards to repay your short-term loans.

Your immediate solution would be to approach your credit provider – be honest, transparent and discuss restructuring your debt repayment plan. Most importantly, live within your means and budget. Eat at home, not restaurants, reduce wasteful expenditure on luxury items and even downgrade your car, house or accommodation.

If this fails, you may need to seek professional help before legal action is taken against you.

The second option to consider is sequestration. This is when your liabilities exceed your assets. In other words, when your debt exceeds the money coming in.

When this is the case you are deemed insolvent. Once this happens, the court can sell your assets (your home, car and personal effects) to repay all your liabilities and debt.

The third option is administration. This is a process in which you hand all your financial affairs to an administrator, who will consolidate all your debt, for a fee, and repay your credit providers on your behalf. The credit providers receive debt repayment on your behalf.

There is nothing more powerful than educating yourself and selecting the right option for you. Debt places an enormous amount of stress on the individual and affects every area of your life.

V This column was contributed by Denzil Jacobs, an admitted advocate with expertise in commercial law. For guidance on legal issues email him on or read his column in People’s Post next month.

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