This is probably the toughest week in the year for those living on credit. Why, well the holiday season is now finally over and children are back at school and most of us are back at work. Next week is month end and by now the bills are arriving in the post or in our inboxes. Reality will hit us squarely this week exposing the collateral damage of our spending over the festive season.

Step one –Open the envelope.

No use deferring the inevitable. Debt costs more in the long run. You need to honestly assess the extent of you indebtedness.
If your debt repayments exceed your affordability even after squeezing as much as possible from your current expenses then you are probably over indebted.
The ratio to income for healthy debt is anything below 30%. South Africans at averaging 76%.
If you cannot repay the cost of the debt you should find help quickly. The problem won’t go away by itself. You need to take charge and get something going.
Sell off property and valuables. Covert watch you can to cash and pay off as much of the debt as you can.

Step two
Contact your creditors and bring your situation to their attention. The lender would probably be better off arranging a compromise with the payment arrangements extending the debt over a longer period and reducing the repayments. In some instances arrangements can be made to service the interest only for a period. Whatever you do, do not apply for more credit.

Step three
Contact a debt counsellor. They are regulated and comply with the regulations of the NCA.
A useful site to get information and help from is the www.ncr.org.gov
Where to find a debt counsellor

Useful tips to avoid debt
Here is an outline of the process provided by a Debt Counsellor – Debtrescue….

Step 1
You complete an application form and provide us with the details of all your Credit Providers.

(Consultations are usually done telephonically and by e-mail, but can also be done in person.)

Step 2
We determine whether you are over-indebted, in other words, does your monthly expenses exceed your monthly income?

(You have to be over-indebted to qualify for Debt Review.)

Step 3
If you are over-indebted, we shall inform all your Credit Providers and the Credit Bureaus that you are under Debt Review. Your Credit Providers will also be requested to provide us with a Certificate of Balance (COB) in respect of your accounts.

(You will immediately start to pay a single provisional reduced monthly instalment in respect of all your Credit Providers which will be affordable to you. During the first 60 working days, legal action may not be taken against you in respect of the debts that are under review.)

Step 4
After receiving all the COB’s, we will restructure your payment plan and negotiate with your Credit Providers where necessary. After negotiations with your Credit Providers, your new restructured payment plan will be sent to all your Credit Providers and this payment plan will take effect.

(Your restructured payment plan will reduce your monthly debt repayments to an affordable amount, leaving you with sufficient money for your living expenses.)

Step 5
We will instruct our specialist attorneys to apply at court in order to make your restructured payment plan a court order. You will not have to appear in court yourself, as your Debt Counsellor will be the applicant in the matter.

(The process will now be completed and you must ensure that your monthly payments are made timeously in order to prevent Credit Providers from taking action against you.)