What to do when debt gets the better of you

Written by Your Future Now

Debt relief can sound daunting. Sometimes life happens and despite your best efforts, you cannot keep up your loan repayments. The good news is that there are different ways to deal with the problem.

You should always talk to your credit provider the minute you realise that you may default. In most cases, the company will help you to make a payment arrangement. It is in its best interest for you to keep paying – even if it is a reduced amount.

In extreme cases, when you cannot come to an agreement with your credit provider, you can call on legal help. There are two legal debt relief processes available to South Africans. These options are administration and debt counselling.



If your total debt is less than R50 000, you can apply to a court to be placed under administration. Your creditors can attend your hearing. They may question you about your assets and standard of living. The issue of cutting down on expenses may be discussed as well. The court may order you to sell certain assets before proceeding with administration.

The benefits of administration

  • The court will calculate the debt repayment you can afford every month.  An administrator (usually an attorney) will be appointed to pay your creditors on your behalf.
  • While an administration order is in force, credit providers cannot take legal action against you without the court’s permission.
  • If a credit provider wrongfully collects any money from you while you are under administration, it can be forced to refund the full amount.

The disadvantages of administration

  • You pay your monthly instalment, as ordered by the court, directly to the administrator. The administrator first deducts 12.5% of the instalment as their own fee, and then pays the rest to your credit providers.
  • Some administrators deduct an extra 10%, or more, as collection commission. The Appeal Court has ruled that this may not be done. Unfortunately, the administration process is not well regulated. Many administrators therefore get away with deducting unlawful fees and misleading consumers.
  • Not all your creditors are paid every month. The administrator takes turns paying the different accounts. This means that each credit provider may only receive payment once every three or four months. In the months that no payment is made, interest continues to run on these accounts, and your debt increases instead of decreases.

In theory, an administration order should last five years. However, because the amount you owe can increase due to interest charges, an order can last for up to 10 years.

Debt Counselling

Debt counselling is when a debt counsellor helps you to manage your money and negotiates new payment plans with your credit providers on your behalf.

The advantages of debt counselling

  • Monthly debt instalments are reduced to an affordable amount.
  • Once a payment plan is made an order of court, creditors cannot take legal action against you.
  • Interest rates are reduced on average from 20.5% to 9.85%.
  • A single debit order will be deducted from you each month and used to pay all your credit providers.

The disadvantages of debt counselling

  • Because your monthly commitments are reduced, it can take longer to pay off your debt, which means that you end up paying more.
  • You cannot access more credit while you are under debt counselling.
  • It is not free. You have to give the counsellor a once-off payment or pay monthly review fees. In some cases, legal fees and the fees of a payment distribution agent (PDA).

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