How would the proposed debt forgiveness work?
The bill has been tailored to assist consumers who have no way of getting out of their debt crisis themselves. Under this legislation, these consumers' debt will be suspended (in part or in full) for up to two years. If, in that time, the applicant's financial circumstances do not improve, the debt may be forgiven altogether.
Who would be eligible to have their debt written off?
You may be eligible to have your debt forgiven in 2019 if your unsecured debt is under R50 000 and was accrued by means of unsecured credit agreements, short-term credit transactions and credit facilities only, and you earned less than R7500 for six months running. Please note: The new bill has necessitated additional safety measures to ensure that consumers who aren’t eligible can’t ‘sneak’ their way into debt forgiveness. Intentionally submitting false information related to debt intervention is now a punishable offence. This includes altering your own financial circumstances or altering joint financial circumstances to be held eligible for debt intervention.
What are the downsides?
While there are no downsides to debt forgiveness when it comes to the consumer initially, South African banks aren’t too happy about the situation, which is understandable. If the bill is passed, the SA banking sector can lose up to R25 billion in unpaid debt. In the wake of these losses, the banks will be forced to make lending conditions a lot tighter to safeguard themselves, which will make it a lot harder for financially-strapped consumers to secure credit.
There you have it – a concise explanation of the new debt forgiveness legislation that will soon impact on the livelihood and wellbeing of South Africa’s most vulnerable citizens. Keep an eye on the blog in coming weeks and months as we share more insight into the current economic climate and how you can keep your finances on an even keel.
In the meantime, feel free to reach out to a Libertine Consultants representative to learn more about our debt services and credit services.