Debt: I’ve been handed over

Kristia van HeerdenDebt, Latest

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The COVID-19 lockdown has cost many South Africans their income. Without an income it’s impossible to meet debt obligations. While many banks and companies offered COVID-specific payment breaks, it may not be enough to help you get back on your feet. Finding out you’ve been handed over when everything else feels so chaotic is extremely distressing.

This article covers what it means to be “handed over”, as well as some strategies to cope with this situation and avoid more serious consequences in the future. 

I can’t deal!

Panic, fear and sadness are common reactions to being handed over. During this crisis these emotions will be amplified, likely accompanied by feelings of hopelessness and a sense of unfairness if you have lost your income. Take a few days to acknowledge how you feel about this situation. Too often we suppress our true emotions about our financial situation, which quickly turns into denial.

The fact that you’re reading this article means you are keen to find solutions to your problem. Luckily you already have everything you need to fix this, even if you’re not earning an income right now. We’re going to show you how.

My debts have been “handed over”. What does it mean?

When a company that initially offered you credit approaches another company to take over the administration of your repayments, you’ve been “handed over”. Companies do this with accounts that are in arrears after a number of attempts to collect the money. They do this because they don’t have the resources to chase people for payment. The “handed over” part refers to the administration of the collection of your money. It doesn’t mean anybody has taken legal action against you.

The company that takes over is called a debt collection agency. These are companies 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. It’s essentially a call centre equipped to help you figure out how to pay your debt.

If you’ve been handed over, your debt has gotten away from you. It’s not advisable to take on more debt at this stage, even though you still can. 

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?

Being handed over is not the same as being 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. You are not able to get access to any more credit once you are in debt review. You pay a fee for this service.

A debt collection agency, such as the one that contacts you when you’ve been handed over, is only concerned with the account that was handed over to them. They don’t know your overall debt situation. 

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. Closing all your accounts after you’ve consolidated your debt is a great way to stop yourself from constantly taking on new debt. This is the key to successful debt consolidation.

Debt 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.

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 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.

In other posts we help you figure out how to get as much as 20% off your debt by putting together a repayment plan. We will also discuss the hidden costs involved in being handed over.

Need more help?

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.

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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.