A Fin24 user has been paying off her debts since 2009, but feels she is not making any progress. She writes:
I have a question regarding the idea that paying off one’s debt depends on how much you make available to pay.
It has been suggested that one should be able to pay off your debt between five to seven years if you don’t have a house or car, and within 10 to 30 years if you do.
I do not have a house nor a car and am under debt review. I have been paying since 2009.
It feels like I am never going to pay these accounts off as the interest and charges on these accounts get added.
It looks like I am not winning. I am with a debt councellor, but just feels like nothing is happening. Please can you advise?
Deborah Solomon of The Debt Counselling Industry (DCI) responds:
There are a few issues that you want addressed and statements that you have made that need to be corrected.
You are correct when stating that paying off one’s debt, would depend on the amount one makes available to creditors monthly.
The assumption on the next statement, namely that one should pay off the debt between five to seven years with no bond or car, is incorrect.
This is because this factor would be determined by the amount of debt, the interest rates, the monthly repayment amount, whether your debt counsellor has taken the in duplum rule into account or whether there is there an annual escalation.
Depending on any of these above factors, the outcome would vary by years.
An example of the above could be the following:
A client can only afford R1 000 per month as repayment towards his creditors.
The debt counsellor does a restructure without trying to lower the interest rates and without adding in an annual escalation of 5%.
The restructure works out that client A would become debt free in a seven year period.
The client can only afford the R1 000 per month as repayment towards his creditors.
The debt counsellor does a restructure with lowering of interest rates and adds in a 5% annual escalation.
The restructure works out that client B would become debt free in a three year period.
Consumers need to realise that the more they can pay off while under debt review, the sooner they will become debt free.
Small amounts make large dents in the debt, especially if a court order has been granted and there is a fixed calculation that must be adhered too.
I would suggest the following in your case:
Get a copy of the court order as well as the repayment plan.
Make sure that the repayments are being adhered to by getting monthly payment reports from the debt counsellor.
Get detailed statements from all credit providers from the inception of each account to date.
Check to see if there are any other charges other than the capital amount and interest being charged.
Anything other than interest and capital would not be in line with the court order and your creditors would need to adjust their systems accordingly.
Don’t allow the creditors to intimidate you. You have a court order, which everyone must adhere to, even the banks. There are no exceptions.
In duplum rule
From the statement of a creditor, determine what date default occurred and then double that debt.
From the date of default, the debt, which includes all service charges, interest rates, credit life insurance, collections and legal fees, may never become more than double.
This is in terms of Section 103(5) of the National Credit Act. It is called the in duplum rule and is one rule every credit provider tries to hide from every consumer.
Consumers must become more aware of their rights, especially in this regard and start challenging their creditors.
The debt under debt review can only go up to a certain point and then must come down.
I suggest you speak to your debt counsellor and follow the above suggestions and I am sure you would be pleasantly surprised.
It does take many hours and this is why many debt counsellors don’t enforce this rule.
But every consumer under debt review needs to work together with his or her debt counsellor, especially when brining to light issues such as the in duplum rule.
My Budget Fitness developed with a team of experts a Debt Negotiation structure – to avoid going into Debt Counselling as we saw that many clients stay trapped in debt.
The only way to get out of debt is to analyse your portfolio, the work out a plan forward and get a top negotiator to renegotiate your debt and then stikc ot the new affordable plan of repayment.
Contact Meyer – firstname.lastname@example.org for more info
Meyer de Waal
021- 461 0065
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