More SA consumers who struggle with debt repayments are facing the crude reality of repossession orders in the pandemic aftermath. Banks, vehicle and assets finance units have already reported an increase in repossessions after last year’s hard lockdown.
Below, we answer some frequently asked questions about repo orders and what happens when you can’t fulfil your credit agreements.
What is a repossession order?
A repossession or repo order is the legal process by which creditors can legally take back your assets due to credit non-payment.
When you take on credit to meet your daily needs, you are legally bound to pay back all loans or purchases in instalments until you settle the creditors’ entire amount. Non-payment means you risk losing possession of the assets you’ve taken on credit.
If you default on agreements by missing a few monthly repayments, your credit providers will urge you to settle these instalments as soon as possible. Generally, legal actions such as repo orders are taken once a client misses three repayments.
What can be repossessed by creditors to settle debts?
Creditors can repossess significant assets such as your home or vehicle as the final step to collect the owed debts. If you don’t settle in due time the debt repayments of your vehicle finance or home loan, creditors will eventually take back your car or property.
How soon do I have to settle my unpaid debts?
The good news is that you still have time to settle the outstanding amount before you face legal action and subsequently a repossession order.
By law, creditors can enforce the agreement in court if the accounts are in arrears for more than twenty business days. Usually, creditors proceed with severe legal action and repo orders following three months of payment defaulting.
I can’t pay my debts. Will I receive a repo order?
Firstly, the creditors will call on you, the defaulting consumer, to bring your payments up to date before any litigation process and repossession order can take place.
Creditors will notify you via phone calls and written notice. It’s important to acknowledge this communication and make amends if possible. The worst thing you can do is to completely ignore this communication.
For example, if you’ve received a written notice from your creditor outlining the next legal actions to be taken, you have ten business days to respond with a course of action.
The creditor will generally recommend immediate payment rectification, an alternative dispute resolution or urge you to consult a debt counsellor.
Seeking advice from a debt professional at ezDebt can help you resume your monthly instalments and settle the amount owed to creditors before further legal action is required e.g. repossession order.
If you still haven’t paid the debts in the agreed time, the creditors have no choice but to go ahead and legally enforce a repo order in the court of law.
How will I get notified about the repo order?
According to the National Credit Act (Act 34 of 2005), the debt collector has to send a letter of demand to request the debt repayment before proceeding with a court summons and repo order.
The letter is sent by registered mail or delivered personally, thus traceable to serve as sufficient proof that you were informed about your defaulting situation and the subsequent legal actions.
Next, failing to take action on the letter, you will be served with a court summons at your last known place of residence. If a judgement is obtained against you, the court will issue a warrant of execution to repossess the assets in question. The repo order is now in force.
The sheriff is the only person who acts on this repossession order and can confiscate the goods from your residence, and must always hand the original warrant upon repossessing the assets.
What will happen to my assets after the repo order?
After the sheriff takes away the assets, these will remain in storage for a few days. This action gives you some time to make the repayments due, and free those goods back into your possession.
Yes, even after a repo order, you can still make up the credit amount and ensure you don’t forfeit your home, vehicle, or other substantial purchases such as furniture or electronics. However, if you don’t act immediately, the goods are forever lost and will be sold, most likely, at a public auction.
Can I avoid a repo order?
Yes, there are a few options. For example, you can voluntary surrender your assets to the credit provider (later to be sold at a public auction) if you cannot commit to the monthly instalments. Doing so willingly will fulfil your repayments and avoid the repossession ordeal but at the high (and avoidable) cost of losing your car and home.
Ideally, you would want to secure all your assets to avoid the family stress and emotional trauma of losing a home or vehicle. In the next blog, we show you how it’s possible to commit to monthly affordable debt repayments and protect your assets against repo orders, once and for all.
Struggling with debt? Our ezDebt professional advisers can help you stay on track with debt repayments and avoid repossession orders. All our debt counsellors are registered with the National Credit Regulator (NCR). Get in touch at www.ezdebt.co.z