Know your rights when you can’t pay your bills
The sharp end of the legal debt collection system is your local Sheriff. If you grew up watching US Western movies your mental image of a Sheriff may be that of a proud defender of peace loving citizens. In the movies, your Sheriff was constantly on the look-out for any danger that may threaten his good citizens and he would take the time to help little old ladies across the street while simultaneously engaged in a gun battle with the Jesse James.
This romantic image is not what your local sherif is about. His job is to:
• Serve summonses and notes
• Execute writs of execution
• Demand monies and costs reflected on the issued writs
• Attach assets
• Remove and store attached assets
• Sell these assets in execution
• Execute warrants of arrest
• Evict defendants from occupied premises
• Enforce any order of the court
An “all round nice guy” said no one ever. During the process of achieving any of the above goals, the Sheriff is NOT obliged to read you your rights or explain what you could immediately do to lessen the impact of his actions. So it would be a good idea to learn about your rights.
So, let’s reel back the movie a few scenes and take a ‘slow motion’ look at everything that may have happened to cause the forced repossession of your worldly goods.
Defaulting on Debt Repayments
Research shows that at least 90% of people want to fulfil the obligations they have agreed to. We have seen cases were people have literally gone without their proper food requirements just to pay enough money to creditors so that they can hang onto the hope of living a normal existence. When debts have piled higher than your ability to service them, or you have simply lost your job, the most effective remedies are generally the last things you would be aware of. Understanding the behind the scenes process of how you could feature in such a horror movie will help you to effectively react to each and every threat that presents its ugly head.
Becoming listed at a Credit Bureau
Most people have heard the term ‘listing at a Credit Bureau’ but few consumers understand the sequence of events that will lead to, and result in, these listings.
When it becomes impossible to service all or any of your debts your slow payments will raise a flag on the computer screens of most lending organisations. This flag tells them to give you a call and ‘gently’ remind you of your obligations. In the typical fashion of denial, most people will re-commit to making payments on time – even though they know that there’s little or no money coming in the door.
Once your predicament becomes obvious to a lender they will begin reporting your slow payments to one, or both of the main Credit Bureaus – TransUnion ITC and Experian.
These bureaus dutifully record your progress down the slippery slope to defaulting on your debt obligations so that any future lender will be able to read your history like a book.
Handover to collection agents
You will realize first, and your creditor a month or two later, that it has become impossible to service your debt repayments. In an attempt to stay sane you might stop taking phone calls from the collection departments of your creditors. When they can see that you are avoiding them your case steps up in urgency.
This is when your file will be handed over to a collection agency that is much more experienced in the art of making you feel very uncomfortable. The collection agents intimately know the law surrounding your debt obligations and they have the knack of making you feel as though you are actually in worse trouble than you currently are. To make their presence appear more ominous they are often affiliated to a law firm.
Threatening Phone Calls and Letters
While your creditors may have found it difficult to get you on the phone, collection agents have a much more commanding tone and they will say things, to whoever picks up the phone, that make you believe that it’s in your best interest to talk to them.
Once you are on line, a careful series of phrases will be used to point out the dire consequences of any further payment avoidance and ask you to commit to a firm payment schedule. The new payment schedule will now include substantial collection costs. Obviously, it would be in your best interest to find a way to settle problem debts before this matter arrives at the magistrate’s court but a debt collector may not feel obliged to suggest some of your best options to you.
Then the threatening letters of demand will begin to arrive. They will suggest that you are on the verge of receiving a judgment and losing a large part of your worldly goods. While this outcome may well be in your future, unless you quickly do something constructive, the collection letters are designed to make you feel that you are just about to have the financed items repossessed and a substantial portion of your household contents confiscated.
The possible issuing of a summons
It is assumed that you will receive the letter of demand within 2 or 3 days of posting and, from then, the letter will state that you have 10 days to make a payment. If you fail to respond within this time frame, the collection agent will arrange for a summons to be issued, which gives you 5 days to get ready for an appearance in court to defend your actions.
If you have a truly understandable reason why you have been unable to make payments to your creditors, it would now most certainly be in your best interest to gather your evidence and prepare a defence that the magistrate might accept.
The taking of a default judgment
Not responding to any communication with a creditor of collection agent is usually a bad idea – and – not responding at this late stage in the proceedings is a very bad idea.
By failing to present your case you will have given the collection agents an open invitation to request a default judgment. Once this is issued, your property ownership rights will be substantially compromised; the door has opened for an invasion of your privacy, comfort and dignity.
Enforcing the default judgement
In effect, a judgment is like a life sentence of severe financial restriction if you do not, or cannot, take action to clear up the mess. This legal ruling will be reported to the major credit bureaus that will list the magistrates decree on your credit record. If you do not take steps to get this sorted out, the listing will remain on your credit record for the next 5 years.
At this stage of the game you will now be in the position of: 1. Forget about financing anything else for the remainder of your working life, or 2. Find the money to offer a repayment and ask a professional debt settlement expert to negotiate a deal which must include the rescission of your judgment. It is extremely important for you to work through a professional at this stage. Many thousands of debtors have tried to sort judgments on their own, made payment, then found that the listing has remained on their credit record. In effect, making them no better off!
Attaching moveable goods
The time has now have arrived when the full impact of your actions will become known to your family and friends. The local Sheriff will be empowered to issue a notice of attachment on enough of your private property to ensure that a significant portion of your debt will be paid through auctioning these belongings.
To achieve this goal, the Sheriff will arrive at your home and, whether you are there or not, will find a way to gain entry. He or she (yes, we have a lot of lady Sheriff’s!) will then make a list of goods that would have originally cost around four to five times the value of your judgment. This is done because your beloved easy chair, sofa, hi-fi and television will probably only fetch around 10% of its original cost at the next auction. Now, isn’t that a really scary thought?
The Sheriff will make a list of those items that will be scheduled for sale and leaves you a notice to the effect that you no longer own these goods. They have been attached and any attempt by you to hide or sell these items will be treated as theft. In other words, if you now start taking inadvisable action to protect your private property you could easily end up with a criminal conviction. Do you now see how serious this can become?
Interdict on movable goods
Further to your household belongings being up for grabs, a motor vehicle that is fully paid off may also be attached toward the objective of recovering your debt. If there is a finance agreement on your motor vehicle – and you are in good standing regarding those payments – that creditor has priority (first lien) over this item until you have paid that debt in full. Vehicle financing houses retain the title deeds of all motor vehicles they lend money against because, in effect, they actually own the vehicle until your final payment is paid.
Although it may seem like an unlikely scenario, if you own the home that you live in (or a piece of land) bond free, the Sheriff will seek and obtain an interdict to attach your home for future auction. This could mean that your one-and-only significant asset will be sold for approximately half of what it is worth and you will be forced to enter into a battle to obtain whatever value (balance of the sale minus your debts) is left after everyone else gets paid.
While all of the above is in progress it is highly probable, if you still have a job, that the collection agent will be approaching your employer with a garnishing order. This of legal document allows your creditor to demand direct payment of a certain amount each month – direct from your salary. Your employer must administer this process and it is highly likely that any monthly, or weekly, costs incurred by them will also be deducted from your salary (they are allowed to charge as much as 5% of the monthly payment). Someone has now truly got his or her hand in your pocket.
Due to the fact that you did not appear in court to defend yourself, and allow the magistrate to more clearly understand the full extent of your current problems, he or she will have decided how much they think you could afford to have deducted from your salary or wages – even if this would actually leave you with almost no take home pay.
We are sure that you would agree that this kind of situation would drive most people to despair, if not angry and socially destructive behaviour.
The net result of all of these things can sometimes foster the complete breakdown of a marriage and / or criminal activity such as theft, workplace fraud and domestic violence
So, as you can now see, the legal system pertaining to credit effectively facilitates the collection of money from defaulting debtors. If you think you can run and hide, in most cases, you will be very wrong indeed.
Until next time,
The MoneyShop.co.za Team