If your debt repayments free up just enough credit to cover your costs for the month, you already know an unplanned event can derail you. An emergency will likely result in missed payments, which can have a severe knock-on effect. The good news? With the right knowledge and some fancy footwork, you can turn the situation around.
In this series of articles we’ll discuss what happens to your emotions when your debt gets handed over. We’ll help you understand what “being handed over” means. We’ll investigate how this process affects how much money you have to pay back.
Hopefully these articles will help you see how being handed over might be an opportunity for you to finally take back control of your financial life.
I can’t deal!
When you’re informed that your debt has been handed over, you’ll likely experience some negative emotions, like panic, fear and sadness. This is perfectly normal. Take a moment to acknowledge how you feel about being contacted about your debt. Too often we suppress our true emotions about our financial situation, which quickly turns into denial.
Your unpleasant emotions are a clue that something in your life needs your attention. The fact that you’re reading this article means you are keen to find solutions to your problems. Luckily you already have everything you need to fix this. We’re going to show you how.
My debts have been “handed over”. What does it mean?
Being handed over means the company that initially gave you credit approached another company to take over the administration of your repayments. Companies do this with accounts that are in arrears after a number of attempts to collect the money. The third party that takes over is called a debt collection agency.
Debt collection agencies are legal entities that follow up with clients whose accounts are in arrears. Like any other financial services provider, debt collection agencies have to obey the law. They aren’t allowed to intimidate or threaten you. They also can’t repossess anything you own. They simply contact you to talk about your outstanding debt and to help you come up with a repayment plan for that account.
Being handed over does count against your credit record, but it’s not impossible to get more debt once one of your accounts has been handed over. However, being handed over is a sign that your debt has gotten away from you. It’s not advisable to take on more debt at this stage.
Tip: If you’d like to learn more about your rights once your debt has been handed over, please click here.
Am I in debt review?
Debt review is a process designed to help you pay off all your debts without being declared insolvent. During this process a debt counsellor takes a look at all your debt obligations. However, you are also not able to get access to any more credit. In a later article we will discuss the costs involved in this process in more detail.
Being handed over is not the same as being in debt review. Remember, the debt collection agency is only concerned with the account that was handed over to them, not your overall debt.
Can a debt collector consolidate my debts?
Debt consolidation is when you take on a single, large loan to pay off all of your smaller loans. Sometimes a bigger, single loan has lower interest rates than other types of short-term debt like store and credit cards. It’s also easier to keep track of debts when they’re all in one place.
You can use the debt review process to consolidate your debts or manage it yourself. Closing all your accounts after you’ve consolidated your debt is also a great way to stop yourself from constantly taking on new debt. This is the key to successful debt consolidation.
Debt collection agencies aren’t the same as debt counsellors. Collection agencies only deal with accounts that get sent to them by their clients. They can help you work out a debt repayment plan for the account that was handed over, but not for all your outstanding debt. If you need help with all of your outstanding debt, it might be time to consider debt review.
The National Credit Regulator is a government organisation tasked with making sure companies act ethically when it comes to giving debt. The NCR also provides a lot of education around debt management, as well as access to debt counsellors and advice around debt consolidation. Find more information here.
Am I insolvent?
Being handed over isn’t the same as being insolvent. That only happens after a legal process where a court determines you have more debt than assets. When you are insolvent, parts or all of your past debts are written off. This will reflect on your credit record when you apply for new debt in a formal financial environment. You will not be able to get any more credit for a predetermined period.
Am I blacklisted?
Since the National Credit Act took effect in 2007, the term “blacklisted’ is no longer used. When you apply for credit, your record simply shows your payment habits. This is used by the credit provider to determine how likely you are to meet your obligations in the future.
Next month we are getting into the rands and cents of being handed over to a debt collector. We’re going to help you figure out how to get as much as 20% off on your debt by putting together a repayment plan and discuss all the hidden costs involved in being handed over.
This series will help you gain control of debts that have spiralled out of control. We will explain what it means to be handed over for collection and how that differs from debt review, debt consolidation and insolvency. We will help you understand your rights as a consumer and offer some debt management strategies. This series is possible with the help of VeriCred, our partners in debt education.
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