14 Nov Government Assistance for Debt Relief
Over 40% of South African consumers are knee-deep in debt with no idea how to get out. According to debt trends in South Africa, the average consumer owes more than R31,000 on their personal loans, R24,323 on their credit cards, and R242,565 on their cars–and this is increasing year-over-year as costs of living rise, global political tensions rise, and demand outweighs supply.
Has the government taken measures to relieve South Africans of their debt? This post discusses current government debt relief measures, including sequestration, administration orders, and debt review. We’ll outline the pros and cons of each measure. Debt help is here, make use of it!
Government Debt Relief Measures
Below, we’ll outline voluntary surrender, administration orders, and debt review, placing them in the context of the average over-indebted consumer’s financial planning.
Administration Orders
An administration order is an order that the Magistrate’s court makes to a consumer that they pay their debts in set monthly payments. Their debts are consolidated and distributed to creditors by an administrator, usually a legal professional or Payment Distribution Agency. They ensure that your debts are paid as agreed per a judgment.
Administration orders are for people with less than R50,000 in overdraft that they’re struggling to pay off.
To get an administration order, you must apply to the Magistrate’s court in your area, listing all your income, debts, and expenses. The order ends when all our debts are paid in full or you’re able to prove you’re financially stable and able to pay your debts as initially agreed.
Pros
You’re protected from legal action, asset repossession, and your debt repayments are structured.
Cons
The administration might take some time to clear after the administration order is paid up. Your interest rates and repayments are not renegotiated. You have no legal guidance or advocate and must apply on your own.
Sequestration
Voluntary surrender, or insolvency, is a legal process wherein all your assets are distributed fairly among your creditors, allowing them to recover some of the money that they’ve lost. You’ll declare bankruptcy and that you can’t afford to repay your debts even if you sell your assets.
Then, your assets would be liquidated and sold to cover at least 20% of what you owe your creditors by a trustee (appointed by the court). Any outstanding debts you owe that aren’t covered by the asset liquidation are written off.
During sequestration, you won’t be able to take out any credit. It will remain on your credit record for as long as 5 years and until you’re not over-indebted.
Pros
You’ll get a fresh start with no debt. You’ll also gain protection from legal action.
Cons
You won’t be able to take out credit for a very long time and you’ll lose your house, car, and any other assets you have.
Debt Review
Debt review is a debt help system wherein a debt counsellor negotiates for reduced debt repayments and interest rates on your behalf. During debt review, you’ll be protected from legal action and asset repossession.
Pros
Save more on your debt, get reduced interest rates, legal protection, and you’ll retain your assets.
Cons
You won’t be able to take out credit while under debt review.
Debt review is regulated under the National Credit Act as a government-approved solution to over-indebtedness. While you won’t be able to take out credit, you’ll pay much less on your debt and have more room in your budget to focus on what matters most–financial freedom.
If you would like help to regain financial wellness, contact True North Debt. We would love to help you save on debt repayments.