Asked by mvdventel on 19-09-2020 09:11:46
Question posted in the National Credit Act Law category relating to Western Cape

Good day

I need help with making proposal to some creditors to pay off my outstanding Debt in a once off lump sum payment.

I'm struggling to pay back my Debts and have already taken a cut in my salary due to COVID repercussions

I would like to pay them off as I don't know if I will still have a job next year.

Thank you & Regards

Michelle

Further information relating to Question:

Also I’m already under Debt Review - but a lot of banks & financial institutions have offered me discounts on my outstanding balances - probably because of COVID situation. So I have managed to pay off 6 Creditors with once-off lump sum payments. Because they gave me discounts ranging from 30% - 50% I now have 2 major debts left FNB and Nedbank whom I collectively owe R135 000. I have approximately R80 000 that I can divide between them. That’s about R40 000 each. I need help convincing them to accept my proposal. Thank you

Posted by Att. Patrick on 19-09-2020 12:39:28

Hi there and thank you for your question,

I am a practicing attorney based in South Africa and I will assist you with your question. Please feel free to ask as many follow up questions in order to clarify your question. If you have a new question, you must please open a new thread.

We can't represent you directly via this website, we can only answer legal questions that you have or give you advice moving forwards. If you're happy with this, then we can proceed.

The first thing that you need to get right is that you need to get in communication with the decisionmaker. The person who is going to say yes, or no, to your proposal. You need to explain to them the advantage of them accepting your proposal and the risks in not accepting it. It is not good enough dealing with a call centre agent.

Secondly, you need to understand that the banks are 'generally' happy to sit back and plod along. They can apply for a judgment against you, they can take you to a section 65 financial enquiry, they will eventually recover their money. So, there is no real incentive for them to accept a compromise payment from you. Especially since the decisionmaker is just an employee, and not the owner of the business who knows how this payment is going to affect the business cash flow. 

In my experience, banks will happily accept payments of R500 / R1000 pm 'forever' rather than write off the recovery of any money. One of my clients (2 weeks ago) was trying to negotiate a compromise, and one of the big 5 banks said that they would write off the interest and then give a 10% discount, maximum. Nothing more than that. We were looking for a 50% write off. They refused. Their legal advisor basically said that they don't care. 

What you can possibly do is to look to see if you could challenge any of the debt (e.g. credit card debt, loan agreement) on the basis that the bank didn't do a financial assessment on you or extended you credit in circumstances where you couldn't afford it. While it might not get you off the debt, it could be a tool to force the bank to give you some sort of discount.

Your personal assets will also come into the decision. If you own a house, or a car, or stuff like that which could be attached and sold, and in fact you are employed and earning money each month (even if it is R5000), there is less incentive for the bank to write off money. They will accept R50 pm against your debt.

If you don't own anything like that, and you are not employed, then you will find the banks more willing to write off the balance. 

Surely your debt review guy should be doing these negotiations and restructures on your behalf? Is that not what you are paying him/her for?

The only other way out of the debt is to sequestrate yourself, but that has many financial consequences which you might not like, like cancelling all of your credit and not giving you access to credit for the next 10 years. 

Good luck!

If there is a part of the answer which you need more advice on, or clarity please continue in this same thread instead of opening a new question.

Att. Patrick

Please remember this is a dialog if you have follow up questions please use the REPLY button and ask. If I did not answer the question you thought you were asking, please respond with the specific question you wanted answered. I hope you found my answer helpful, and you have finished asking your questions, please click on the GREEN ACCEPT button in order to mark the question as closed.

Good Day Patrick
Thank you very much for replying to my question. You have given me the most comprehensive answer so far!
I understand that I need to get hold of decision-maker directly - which would be someone at the Bank. Up to now I have dealt with the Collections or Lawyers because the accounts have been handed-over.
Getting hold of that decision-maker directly is tricky because they just tell you that the account has been handed over & you should contact the Collections or Lawyers.

Ok if your client was not able to get that 50% then I stand no chance either.
The only tool I do have is that at the time the Loan was given to me I was already over-indebted and so I could claim reckless lending.
And they didn't do their due diligence of checking with my husband if he is aware of the Loans (we are married in CoP) Because he didnt know about the Loans - I took it without telling him. On the application Forms I did state I'm Married in CoP

And Yes because I'm Married in CoP I do have alot of assets (my husband's)

Yes my Debt Restructuring guy should do this, but he hasn't And now he is not responding to my requests anymore. He has basically abandoned me And I might have to start all over with a new one?
I have basically negotiated myself with all my Creditors and managed to get discounts (between 30-50%) from 6 of them- I had a huge amount of Debt

My debt-restructuring guy somehow managed not to get my husband involved in the debt restructuring process - I don't know how he did that because we are Married in CoP, but I was glad he could do that, as it would have not been feasible.

NedBank & FNB has both given me a discount of 20% but my Debt is still sitting at R135 000 after the discounts. Which is still crippling to me.

Thank you & Best Regards
Michelle
073 196 0041

Posted by Att. Patrick on 20-09-2020 14:08:19

If the bank has appointed a lawyer, that's good, deal with him/her because the lawyer can expand on your explanation as to the risks the bank has in not accepting your proposal.

You might need to apply to cancel your debt review process if the guy isn't getting back to you. Then, negotiate yourself.

The fact that you have lots of assets (in your husband's name) is a massive reason for the bank NOT to accept a compromise.

I don't think that you're going to be able to get much more of a discount from the banks than you already have - just being honest here. There is no incentive for them to write off the money. Also, they've already given you a 20% discount. 

I don't think that sequestration is an option for you because you're married IN community of property, so your husband's estate will be sequestrated as well as yours ... not ideal.

I think that you should accept the 20% discount, pay what you can, and then agree with them to accept a monthly payment of R500 pm or something like that. 

Then, take a couple of years to pay it off.

Otherwise, you must consolidate your debt under an existing home loan (so draw down on your home loan bond) to get some money to pay off your creditors. 

Remember, the creditors are charging you prime + a high percentage for the debt. 

Your home loan might be charging you prime - a percentage. Much better!

Dear Patrick

Nedbank wants me to pay off R70 000 over 3 months (approx R26000 per month)
Do you thinks its good idea to pay make at least 1 such payment and then try to convince them to write off some more?
And use your advice below as a reason to write off more:
What you can possibly do is to look to see if you could challenge any of the debt (e.g. credit card debt, loan agreement) on the basis that the bank didn't do a financial assessment on you or extended you credit in circumstances where you couldn't afford it. While it might not get you off the debt, it could be a tool to force the bank to give you some sort of discount.

Thank you & Best Regards
Michelle

Posted by Att. Patrick on 21-09-2020 13:57:17

Either they must accept a smaller overall amount (i.e. they must write off a large %) in 2 / 3 lump sum payments, OR they must accept a larger overall amount (i.e. write off a tiny %) but then accept monthly payment of R500 or such like.

I think that at the moment you are coming from a position of some power, but as soon as you pay them R26,000 you will lose that amount of power. Just be cautious of making payments first before they agree to a write off. 

Thank you Patrick for your excellent advice!
Best Regards
Michelle