MONEY CLINIC | The 'no work, no pay' principle applies to me. How do I deal with my debt?

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A Fin24 reader has received a letter stating that the 'no work, no pay' principle will be in effect for the month of May. Seeking help, he asks an expert for guidance on the way forward with his debt and flat rental, which is still due every month.

He writes:

I have a vehicle financed with Wesbank and also a private loan with Direct Axis. Yesterday I received a letter from my employer stating the no work no pay principle will apply; they will only pay the medical aid and the provident fund contributions. This will leave me with absolutely no income at the end of the month. My employer did apply for UIF when the lockdown started but has received nothing yet.

At the end of April I received about 70% of my salary and paid all my monthly debt. I’m also renting a flat that costs R5 700 per month.  

Please let me know how to deal with this as I will only return to work on Level 2.

Mark Bishop, Managing Member at Credit Clear responds:

This is an exceptionally tough time and many people are finding themselves faced with unexpected financial stress. It is a sad reality that many businesses are being placed in positions where they are having to enforce 'no work no pay' principles and even retrenchments.

We can highly recommend debt restructuring during this time. Debt restructuring includes payment holidays, credit insurance claims (if applicable) and reduced instalments being paid to creditors. 

You need to be pro-active and contact your creditors as soon as possible to ascertain whether they do offer payment holidays for a period of a few months or whether you in fact have any credit insurance on the contracts which will come into effect during this time. 

Many of the large institutions are more than willing to assist their clients; however, they do have certain requirements that need to be met before they will consider granting a payment holiday or the credit insurance will come into effect. 

With regard to your rental, we suggest that you contact your landlord and ask him/her if you can enter into an agreement whereby they use your deposit for the June 2020 rental and, as soon as you are receiving your income again, you pay an additional amount over and above the rental amount for six months to top up the deposit. 

Stay strong and keep positive, these uncertain times will pass.

*Disclaimer: Credit Clear is not a registered financial advisor

Questions may be edited for brevity and clarity.

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