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Negotiating with banks to write off debt

A Fin24 user wants to know if there is a way to negotiate with banks in order for them to write off a debt. She writes:

Is there a way of negotiating with banks or credit providers in order for them to write off my debt and if so, how do I go about it?

Fin24 asked a debt counsellor and a bank for comment.

Sihle Bolani, manager of media relations at Standard Bank's personal and business banking unit, responds:

Should you experience financial difficulty or realise that you will not be able to service your loan repayments in a timely fashion, it is best to approach your bank as soon as possible.

The sooner you approach your bank, the more options are available to help you through difficult times.

These could include paying reduced installments for a period of time or extending the loan term.

Not making regular payments will negatively impact your credit profile, which will make it more difficult to get credit in future.

The same applies when the bank writes off part or all of the loan. It is, therefore, best to speak to your bank as soon as possible to figure out which course of action is best for you.  

Renee Marais NCRDC1780, an independent debt counsellor, responds:

Creditors are in the business of making money for their shareholders. If creditors were to write off the debt of consumers who are in trouble or who can
no longer afford it, our whole credit market will collapse.

If you borrow money, you have to repay it.

If you are not in a position to pay your debt, there are a few options available:

Sequestration

Apply for sequestration with a lawyer specialising in such matters. You will still have to pay a portion of the money owed and there is a period of rehabilitation before you are in a position to obtain credit again.

Debt review

Apply for debt review with a registered debt counsellor. This will reduce the monthly repayments and extend the period of repaying the outstanding credit.

Negotiate

Negotiate with the creditor. You will still have to pay the debt, but the original agreement may be amended by the creditor.

Most creditors have several options available.

If you stop paying the debt and the creditor "writes off" your debt, it does not mean that you do not owe the creditor the money.

It only means the money owed is listed as "bad" credit with the creditor and will be treated in a different way.

You will always owe the money you used. You have signed a legal and binding document at the time that you borrowed the money, undertaking that you will repay it over a specific term, including costs and charges as well as the interest.

Creditors might blacklist you and this will impact on your future credit life and may also impact on obtaining employment.

Legal action

It is also possible that the creditor will take legal action against you and obtain a judgement.

Such a judgement will be listed on your portfolio at the credit bureaux and may also result in the issue of a garnishee order (against your salary).

Those may only be removed when the debt has been paid.

Also remember the legal fees for any such actions from the creditor will result in costs that will be added to your outstanding amount.

- 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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