Over-indebted? Apply for a debt review
Over-indebted consumers who do not apply for debt review under the National Credit Act risk not being assisted by the courts when the debtor is sued by the credit provider.
Andrew Morrissey of the law firm Deneys Reitz says Section 86 of the act entitles any consumer who feels over-indebted to apply for a debt review from the recognised debt counsellors.
His advice is, if you are over-indebted, don't wait for the credit provider to take the first action to the courts because the courts may be strained when you appeal for referred debt counselling.
Referring to a recent case where a local bank applied for judgment after a client defaulted on a bond, Morrissey says the debtor, who it was the first time he had sought help, asked the court for relief under section 85 of the Act.
The section entitles a consumer to be referred to a debt counsellor or relief from his over-indebtedness by the court.
If there is proof of over-indebtedness, the debt counsellor will by negotiation or court order rearrange the consumer's debts in order to give him or her relief.
According to the court, a consumer who fails to use these simple and cost-effective mechanisms to be declared over-indebted with the possible reorganisation of their debts might not be assisted by a court when the debtor is sued by the credit provider.
Morrissey says the failure of consumers to act in their own interests may well influence a court not to exercise a discretion to assist.
Under the act a credit provider may not go to court before delivering a notice to the defaulting consumer.
This notice should draw the default to the consumer's attention and propose that the consumer refers the credit agreement to a debt counsellor or takes other steps to resolve any dispute or to obtain relief from the immediate default.
Only if the consumer ignores the notice or rejects the proposals can the credit provider go to court. Morrissey says the message is quite clear: "Take early and active steps to resolve your financial difficulties. Failure to help yourself will not find favour with the courts."