Consequences for not Paying your Credit Card Debt in South Africa

Failing to pay your Credit Card debt can put you in a legal predicament. Missing out on even one monthly payment can negatively impact your Credit Score. This stain can affect your Credit Score for up to 5 years. A low Credit Score means having trouble with taking loans, creating accounts, or even renting a property in the future. What should you do if you are unable to pay your Credit Card debt in South Africa? Let's find out in this article.

If You Cannot Pay Credit Card Debt in South Africa...

Then do not worry as there are no instant consequences. Your bank will not immediately take legal action against you. However, a gradual build-up of failing to pay your Credit Card debts can lead to legal consequences if left unattended. Here's what the consequences may generally look like.

A gradual build-up of failing to pay your credit card debts can lead to legal consequences

A. Impaired Credit Record on Credit Bureau

A late or missed payment on your Credit Card debt can negatively affect your Credit Score. The impact on your score also depends on how late the payment is or how often you are missing payments. Your non-payments will be reported to Credit Bureaus, which will affect your Credit Score. Your bank will generally report you after 45 days of non-payment.

In case of late payments, you may have to pay an extra fee as a penalty. This also affects your credit worthiness with the Credit Provider directly, and not just your Credit Score with Credit Bureaus.

If you cannot pay your Credit Card talk to your Credit Provider as soon as possible.

B. Collection Efforts

For missed payments, your bank or Credit Provider will attempt to contact you. This will include phone calls, emails, SMS's, and letters demanding payment.

What may seem casual at first can escalate quickly if you ignore the collection efforts. In such cases, you may receive a Section 129 notice (A Legal Letter of Demand). This is the final step before your bank begins taking legal action against you.

A Credit Provider can issue a Section 129 Notice under the National Credit Act No. 34 of 2005 if you fail to make payments after 20 business days. Generally though you can expect to receive this notice after a Final Written warning from your Credit Provider. i.e. 3 months missed payments.

None payment of Credit Card debt could result in a court summons and default judgement

C. Legal Action or Debt Collectors

A Section 129 Notice gives you 10 business days to comply. At this point, you have only two options: either comply with the notice or approach a Debt Counsellor for assistance with Debt Review.

Otherwise, your bank or Credit Providers may hand over your case to Debt Collectors or Lawyers. You may receive calls from Debt Collectors to demand repayment.

Worse yet, you may receive a Court Summons for legal proceedings against your inability to pay your debt. This is a serious matter and you should not take this lightly.

D. Court Process

If you receive the summons and fail to comply with it, the Court may issue a Default Judgement. This gives your Credit Providers legal power to garnish your wages, or attach financed assets. They may even apply for a Writ of Execution against your paid off assets to recuperate their costs.

E. Emoluments Attachment Order

If the Credit Provider is unable to attach assets or recuperate costs then the next go-to step for a court is to issue an EAO or Emoluments Attachment Order (Also referred to as a Garnishee Order). This type of Court Order gives your Credit Providers the power to deduct money for the outstanding debt directly from your salary or other sources of income.

In this scenario, your employer will be instructed by the Courts to deduct a mandated installment from your salary, and so you will see a deduction on your salary slip each month until this debt is settled.

F. Sequestration (The Endgame)

If your income sources cannot cover the debts you owe, you may have to apply for Voluntary Sequestration or your Credit Providers may apply for a Compulsory Sequestration Order. Sequestration is declared when the defendant is insolvent. The Credit Providers may seize your financed assets and you will be restricted from obtaining credit for 4-5 years. Bank employees, Estate Agents, Insurance Brokers and Accountants will be affected by Sequestration and will be unable to work in those positions under their licenses for 4-5 years..

What should I do if I Cannot Pay Credit Card Debt in South Africa?

Assess your situation. If you feel like you cannot pay your Credit Card debt on time, then there are steps you can take.

First, consider discussing your situation with your Credit Provider. A successful negotiation with your Credit Provider could result in payment holidays being granted, debt reconstruction, or lower interest rates.

If your debt is unmanageable, you can consider Debt Review with a registered Debt Counsellor in South Africa. On the other hand, if you are indecisive, you can contact us for an assessment of the situation.

If you require insightful advice or assistance with liquidation, bankruptcy, or other insolvency-related situations, book an appointment with us today.

Considering Voluntary Sequestration? We have legal experts with 20 years experience that can guide you through the process. Our main aim is to be as informative as possible. Let's Chat.

If you require advice with regards to Sequestration, Voluntary Surrender, Business Liquidations, Insolvency, Bankruptcy or Credit Rehabilitation kindly contact SOLVENDI as follows:

National: 087 220 0710

Head Office: 010 880 7589

Email: consultations@solvendi.co.za 

Website: www.solvendi.co.za