MONEY CLINIC | I'm unemployed and unable to pay my debt - what should I do?

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To address historical debt, there are a few options available for consumers.
To address historical debt, there are a few options available for consumers.
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A Fin24 unemployed reader struggling to pay credit card and school fee debt wants to know what the best way is to go about dealing with it.

She writes:

I have been unemployed since the end of 2013. I am 59 years old this year. I have been receiving the R350 grant since last May. I've had people calling me to repay debt, which I had in 2006/07. It's a credit card, amounting to about R25 000.

The other debts is school fees of the past two years. I suspect that I did not get an exemption. It amounts to about R84 000. My child is still in school and I'm awaiting the current year's exemption application results. In May 2020, he deregistered due to a lack of facilities and gadgets to study from home [during lockdown]. 

The school just sent me a statement for the 2016 and 2017 fees, minus about R17 000 for last year, which left a balance of around R55 000 plus R20 000 plus the fees for 2021. I have, on numerous occasions, told the school's lawyers about my situation. There's no way I will ever be able to pay a cent of this. 

I sent them an email and asked them to present it to the magistrate when they go to court. They said they would discuss the problem with their seniors and the school, but I am still receiving emails - despite getting the exemption in 2019 as well. How best do I deal with all these people? 

Benay Sager, chief operating officer at DebtBustersresponds:  

This is a very sad situation for this particular consumer – someone who wants to responsibly pay back what they borrowed, but is unable to do so now. 

Unfortunately, this is quite a prevalent situation in SA. In this case, the consumer seems to be struggling with paying back money owed to a school, as well as money that was borrowed several years ago - i.e. a "historical debt". For school debt, the best way to deal with it is to wait for the exemption letter(s) that would be received from the relevant authorities. Since debt owed to schools is not covered under the National Credit Act, this type of debt needs to be dealt with separately. 

To address historical debt, there are a few options available for consumers. If they had not paid towards this debt or acknowledged it for a period of time (depending on the nature of the debt, this could be as little as three years or as long as 30 years), the debt may have prescribed.

When debt has prescribed, it means the consumer is no longer liable for it. In this case, the consumer stated the debt is from 2006, so it would be important to first establish whether this debt has prescribed. The best way to assess whether this debt has prescribed would be to see what is reflected on the consumer’s credit report, so we urge the consumer to get a free copy of their credit report.

If the consumer is unsure how to determine whether debt has prescribed, a law or legal clinic - which generally operates free of charge - may be the best place to help the consumer. If debt has not prescribed, it will be important to establish a few things: who owns the debt, how much the actual debt amount is, how much the consumer still owes, and, most importantly, whether the in duplum rule can be applied. In duplum, literally translated from Latin means double the amount, is a protection mechanism to prevent consumers from having to pay towards a debt in a permanent fashion. 

To assess all this, one would need to know how much the consumer borrowed originally, how much the consumer has paid since inception of credit agreement, how much (if any) were added charges and additional costs (especially pertinent if debt was sold between entities). If the total amount (including all payments towards fees, interest, etc.) the consumer has paid since inception of the credit agreement is double of the amount the consumer initially borrowed, it is possible that in duplum rule will apply. 

In that case, the consumer would not be liable for any more payments. Again, to assess this, a visit to a free law or legal clinic would be best.  

Questions may be edited for brevity and clarity.

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