As the classical aphorism goes: Time is Money. This article seeks to, in part, explain how debt collection processes work in South Africa and attempt to apprise debtor of financial expenses associated thereto. Hopefully, the debtor will be encouraged to approach and manage their debts more conducively.

Having debts are common. Depending on circumstances, such as applying for credit, having debt is favorable. Otherwise, when creditors encroach in an adverse manner, often one wishes that their debts could just disappear.

This article is purposed to relay legally based information to debtors and help the approach their indebtedness with a more conducive approach. This will be done by outlining, very briefly, how the law works in relation to debt collection, from the moment of hand over to various debt recoveries. The main goal is to help debtors avoid getting into more automatic debt should they decide to avoid their creditors debt recovery calls and or legal processes involved.

Debts arise for several reasons, it may be from having a tough time financially, poor decisions, ignoring to personally pay the balance for medical services rendered where the medical aid refused to pay all monies claimed, outstanding school or tuition fees and so on, the list is endless.

What can a creditor do when an account is due and or has not been paid over a certain period? The general, though not conclusive answer is outlined below.

DEBT COLLECTION AND RECOVERY STEPS

1. Demand: Courtesy call and Letter of Demand
   
   More often than not, a creditor, or their agent or attorney will engage in a soft collection process and contact the debtor, if the debtor is agreeable, an informal arrangement for payment may be concluded, and if the debtor sticks to the agreement, the possibility of satisfying the debt quicker and minimal fee remains reasonable.
   
   A creditor, may also send out a letter of demand, basically placing the debtor in mora (on terms). Under credit agreement debts, a creditor is required by law to send out a letter in terms of Section 129. A Section 129 letter is sent to a consumer when the consumer is in default of the credit agreement, and the consumer has failed to arrange to settle the arrears. The letter also informs the debtor of their legal rights and alternative avenues. Such a stage may include the conclusion of an acknowledgement of debt.
   
   
2. Acknowledgement of debt
   
   An acknowledgement of debt is often a written agreement where the debtor admits their indebtedness and formally makes an agreement and specify terms of repayment. This may include a consent to judgement should the debtor default on the arrangement.
   
   Judgement (often by default).
   
   If the above mentioned steps have been taken and there is no possibility of a consensual resolution of credit agreement disputes, the creditor will issue summons and subsequently obtain judgement against the debtor. This stage is facilitated before courts of law. A debtor will be duly notified and can defend the matter if they have a valid defense.
   
   By this stage, costs associated with debt recovery substantially increased, because lawyer’s services are now involved.
   
   
3. Execution of judgement.
   
   A creditor has different routes available to them to satisfy their judgment.
   
   The judgement creditor may obtain a warrant of execution against property of the judgement debtor. The sheriff upon instruction will go to the judgement debtor and attach, firstly, movable property and if that is still not enough, the judgement creditor can apply to court to execute specially on the immovable property of the debtor. The sheriff after attaching the debtor’s property, will sell such property at an auction and the proceeds will pay the debts and all the associated costs– from the courtesy call to the sheriff’s fees.
   
   It is pertinent to mention that, in the chronological order of the debt recovery steps, the more steps taken, the more the debtor will be burdened financially because in law, the debtor is liable to pay, not only the capital owed, but also for the costs associated with the collection of the debt.
   
   In practice, it often happens that the debtor will hide their property or not point it out to the sheriff. What happens if that is the case?
   
   
4. Financial Enquiry (Section 65).
   
   If the judgement debt remains unsatisfied after at least ten (10) days after the judgement was granted, a creditor may call a debtor to court for a financial enquiry. This means, if the debtor is employed, time away from work and or other obligations, and the costs will be for the debtor to pay.
   
   The debtor is called to court to give reasons why the debt remains unsatisfied. The court can make an emoluments attachment order that, if the debtor is employed, their employer deduct a specified amount from the debtor’s salary and pay it towards his debt.
   
   
5. Garnishee Order.
   
   If the judgement creditor is aware that the debtor has funds or credit due to them held somewhere, either in their bank (investment or savings account) or by a debtor of the judgment debtor, the former can apply to court for an order that, the bank or anyone who has credit due to the debtor, be ordered to make such payment top the judgement creditor.

The above-mentioned steps are costly, and those costs are for the debtor. Associated costs also include collection commission as well as interest on the capital debt. This, in turn, has a result of turning a very minimal debt into a substantial one. The longer time it takes to recover the debt, the more costly it is for the debtor.

A word that goes out to debtors: debts do not just disappear, rather, they increase. Do not ignore your creditors, ignoring and avoiding them only means more costs for your account as the judgement debtor. Obtain legal advice for assistance with your debts and understanding of your legal rights when your creditors come knocking.

Reference List:

• Magistrate's Court Act 32 of 1944.
• National Credit ACT 34 of 2005.