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Silver lining to job loss

A Fin24 user who is on the verge of retrenchment wants to avoid being blacklisted. He writes:

I registered with a debt review company early this year and I have realised that since then not much has been paid to my creditors. However, I was told that it is normal procedure.

Unfortunately my company is retrenching and I am one of the victims.

In a month’s time I will be retrenched and my debt counsellor tells me there is nothing they can do to help me settle my accounts and they will drop me within two months if I do not find employment.

Kindly advise on a way forward and what my options are so I don’t end up being blacklisted.

Friedl Kreuser, an attorney and manager at 6cents, a division of Summit Financial Partners, responds:

While retrenchment is rarely fun, there are some financial benefits to be had if you play your cards right:

1. You likely have credit insurance on most of your debts. This insurance is usually a standard part of your monthly debt instalments, but most consumers never get the opportunity to claim a payout from credit insurance as it pays out in case of retrenchment or death.

Depending on the terms of the specific insurance, it will usually either pay your debt instalments for a few months, or pay off a lump sum of your debt. In this sense, retrenchment is a great opportunity to make a claim on your credit insurance.

Contact each of your credit providers and find out if you have credit insurance that will pay out in case of retrenchment. This could help you pay back a portion of your debt while you are looking for a new job.

2. You should also receive a severance payout from your employer. Depending on how long you have been working for the company, it will be either a small or a big sum of money.

If you use this lump sum correctly, it can make a big difference to your finances. While you could use it to start a business or put away a good nest egg for retirement, if you are currently over-indebted the best option would be to use the severance lump sum to settle as much of your debt as possible.

Because unsecured debt (like credit cards, personal loans and retail accounts) usually have very high interest rates, paying them off will save you quite a bit of money (and stress) in the long run.

3. While unemployed, you can claim from the Unemployment Insurance Fund (UIF).

The UIF payout may be small in comparison to your current salary, but it is better than nothing and can help you stay on top of your essential expenses and debts until you find a new job.

4. Make re-employment your number one priority and focus, so that you don't have to live off your severance pay.

 - 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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