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Can I get a debt review grace period?

Feb 04 2013 10:25

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A Fin24 user already under debt review has just lost his job and doesn’t want to lose his house. He writes:

I am under debt review and I used to pay my creditors, but now I am out of a job.

What can I do? I don’t what to lose my house.

I just need at least two months to look for another job, and then when I find one I can continue to make payments. Can I do that?

Please, I need someone to give me advice on what I must do.

Friedl Kreuser of Summit Financial Partners responds:

This is a very difficult situation, as credit providers can get quite aggressive when they fear they will not receive their money.

When a consumer under debt counselling fails to make payments according to the payment proposal submitted to their credit providers, the credit provider is within their rights to terminate the debt review and proceed with legal action to recover the full outstanding amount.

Some credit providers may be lenient if the debt counsellor explains the consumer's circumstances, but we have not often found this to be the case.

My advice is to get a new job ASAP (even if it is a temporary, low-paying job while you look for a better permanent position) and pay whatever you can to your credit providers in the meantime.

The National Credit Act provides two potential options for consumers who find themselves temporarily unemployed and unable to meet their debt counselling payments:

1. The debt counsellor can apply to the magistrate's court to postpone the payments for a specified period (e g three months) so that credit providers cannot demand payments for that period, while the consumer looks for work.

This is in terms of Section 86(7)(c)(ii)(bb) of the act. The debt counsellor should, however, be sure to ask the court to also postpone the charging of interest on these accounts for this period, in terms of Sections 103(2) and 103(3).

It is unfortunate, however, that lodging a court application in itself may take a few months, defeating the purpose of the application, but it is still worth a try.

2. If any credit providers do terminate debt counselling and take legal action against the Fin24 user, he can respond to the summons and use Section 86(11) to request the court to reinstate the relevant account under debt counselling.

This will require the consumer to appear in court to defend his case. It is not always successful, but worth the effort.

 - Fin24

Do you have a pressing financial question? Post it on our Money Clinic section and we will get an expert to answer your query.

Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers.

Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.            

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money clinic  |  debt  |  debt review



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