Debt & credit

Most people arrive here because something has already happened. A letter came from an attorney. Money vanished off your salary. The bank phoned about the car. Or a home loan was declined and nobody will tell you why. This page sorts those situations into the right starting point, so you stop guessing and start with the question that actually fits your problem.

What this area of law covers

Debt and credit law governs what a creditor may do to get money out of you, and what you may do to stop it. In South Africa the central statute is the National Credit Act 34 of 2005, which covers almost every loan, credit card, store account, overdraft and vehicle finance agreement. It sets out the notices a creditor must send before it sues you, the debt review process, and how credit bureaux must handle your record. Alongside it sit the Prescription Act 68 of 1969, which kills off old debts, and the Magistrates' Courts Act 32 of 1944, which controls the orders that attach your salary.

The situations people actually arrive with are narrower than the statutes. Your salary is short and you cannot work out who deducted from it. A collector is calling your workplace and your family. You want to know whether a debt from 2016 can still be enforced. You are in debt review and it feels like it will never end, or you want out. A judgment you never knew about is sitting on your credit report. The bank wants the car back. Or you are the one who is owed money and cannot get paid.

Two ideas run through all of it. First, a creditor almost always needs a court order before it can take anything from you, whether that is your salary, your car or your furniture. Second, almost every debt has an expiry date, and creditors rely on you not knowing yours.

Where to start, by problem

If money is being deducted from your salary and you did not agree to it, start with what is an emoluments attachment order, then read can a garnishee order be placed on my salary without my knowledge. Many of these orders were granted in the wrong court, or without proper consent, and can be attacked.

If a letter arrived warning you that you are in arrears and something will follow, that is probably a section 129 notice. Read what is a section 129 notice and what should I do about it. This letter is the fork in the road. Answering it opens options that disappear once summons is issued.

If the debt is old and you are not sure it can still be enforced, read how to check if a debt has prescribed and then what happens when a debt prescribes. Prescription is the single most underused defence in South African consumer debt.

If collectors are phoning you at work, or phoning your relatives, read how to stop debt collectors harassing you and can debt collectors call me at work. There are limits on what a registered debt collector may do, and a complaints route when they cross them.

If your credit report shows something wrong, paid or not yours, read how to dispute a listing on your credit report. The bureau must investigate at no charge to you.

If you cannot pay everything every month and want a formal way out, compare the routes in debt review versus sequestration, which is right for you. They are not interchangeable, and choosing the wrong one is expensive.

If you are already in debt review, read how long does debt review take in South Africa, how does debt review affect my credit score and can I buy a car or house while under debt review. If you want out early, read how to get out of debt review early. The clearance certificate matters more than most people realise.

If the bank is threatening to take your car, read can the bank repossess my car without a court order before you hand over any keys.

If someone in your family has died owing money, read what happens to my debt when I die. Creditors chase surviving relatives who owe nothing at all.

The deadlines that catch people out

Prescription. Most ordinary debts prescribe three years after the debt became due. That includes credit card balances, store accounts, personal loans, overdrafts and municipal accounts. Once a debt has prescribed, it cannot be enforced and it may not be listed on your credit record. The catch is that, while the three years are still running, the clock restarts if you acknowledge the debt, and a part payment or an email saying "I will pay next month" can count as an acknowledgement. After the three years have run, a payment does not restart the clock, but you cannot get the money back and a collector may argue that you gave up the defence. Some debts run longer, including judgment debts and mortgage bonds, so check yours rather than assuming. Use the prescription checker.

A section 129 notice. Once it is delivered you have a limited window to respond and refer the matter to a debt counsellor, an alternative dispute resolution agent or an ombud before the creditor may go to court. Miss it and the creditor may issue summons.

A summons. Once you are served, you have a short period to enter an appearance to defend. Miss it and default judgment can be taken against you without you ever seeing the inside of a courtroom. That judgment then sits on your record for years and opens the door to attachment of your salary or your goods.

Credit bureau disputes. Once you lodge a dispute the bureau must investigate within the period set by the National Credit Act, and the listing must be marked as disputed in the meantime. Do not let a dispute sit unanswered without following up.

Debt review. Withdrawing is only straightforward at certain stages. After a court order restructuring your debts, getting out early is a court process, not a phone call.

What it costs, and what is free

The full picture is on what does debt and credit cost. The short version is that the routes most likely to help you are free.

The National Credit Regulator takes complaints about credit providers, debt counsellors and credit bureaux at no charge. The Credit Ombud within the National Financial Ombud Scheme South Africa resolves disputes about credit agreements and listings at no cost to you. Credit bureaux must give you a free credit report each year and must investigate a disputed listing without charging you. The Small Claims Court charges no fee and allows no attorneys, which cuts both ways. Legal Aid South Africa applies a means test and takes some civil matters. Debt counsellors charge regulated fees that are built into your restructured payment rather than paid upfront.

Where money does go out the door is defending a summons, applying to rescind a default judgment, opposing a repossession, or sequestration, which is a High Court application and the most expensive route on this page.

The mistakes that cost the most

Ignoring a summons. Nothing on this page costs you more. A default judgment is taken in your absence, and undoing it later takes a rescission application you must pay for.

Paying something towards an old debt. A small payment on a debt that was about to prescribe can restart the three year clock and keep alive a claim you were about to escape. On a debt that has already prescribed, the payment cannot be reclaimed, and a collector may argue that it showed you had given up the defence.

Admitting the debt in writing. The same problem. A collector who asks you to "just confirm the amount so we can update our records" may be trying to interrupt prescription.

Handing over the car voluntarily. Once you surrender the vehicle, it goes to auction, and you remain liable for the shortfall between the auction price and the balance. Understand the numbers before you agree.

Signing consent to judgment or an emoluments attachment order. People sign these at a collector's office thinking it is a payment arrangement. It is a court process that follows you for years.

Treating debt review as a phone call you can cancel. Once the process starts, your credit record reflects it and exiting has formal requirements. Go in knowing that.

Assuming a paid debt disappears on its own. Listings must be updated, and often they are not unless you push.

The tools on this site that help here

• Debt relief options asks about your income, debts and assets and tells you which formal routes are actually open to you and which are not.
• Prescription checker works out the date on which a debt or claim prescribes.
• Debt interest and in duplum shows where arrear interest must stop, because it may not grow past the capital you still owe.
• Small claims court checks whether a debt owed to you can be recovered without an attorney and without a court fee.
• Court fees gives a rough cost band for suing or collecting through the courts.
• Credit bureau dispute letter asks a bureau to investigate and correct a listing.
• Prescription dispute letter to a debt collector tells a collector the debt has prescribed and that collection and listing must stop.
• Letter of demand for an unpaid debt is for when you are the one who is owed.

When you need an attorney

Get one when you have been served with a summons and you have a defence worth running. Get one when a default judgment already exists and you want it rescinded, because there are grounds and time limits to satisfy. Get one when a creditor is applying to have your home declared executable, since that is a serious step and a court must consider your circumstances. Get one when you are considering sequestration, which is a High Court application with real consequences for your assets. Get one when an emoluments attachment order was granted in a distant court or without proper consent, because setting it aside is a formal application. Get one when the amount in dispute is large enough that the fee is small next to what you stand to lose.

For anything smaller, start with the free routes above. LawMatch is not a law firm. This page is general information about South African law, not legal advice about your situation.