Adv Randolph Samuel @ Lucid Living
In April 38 000 civil judgments for debt amounting to R383m were recorded, according to the latest figures released by Statistics SA.
In addition, the number of civil summonses issued for debt fell 25.1% y/y in April.
A civil judgment refers to the final order of a court in a civil lawsuit, while a civil summons refers to a legal document informing an individual that a lawsuit has been filed against him or her.
A civil judgment process, is the course of action taken by a creditor to enforce their rights under a credit agreement. The civil judgment then permits the creditor, to repossess your assets or garnishee your salary, to settle the debt owed to them.
According to statistics published by the National Credit Regulator (for the period: Q4 2010), 8.61 million consumers had defaulted on repayment of their credit agreements, for more than 3 months.
When a consumer defaults on repayment of the instalment on a credit agreement, the natural course of action for the creditor to follow is to obtain a civil judgment. Therefore we must ask an obvious question: if 46.5% of consumers are in default on repayments of their credit agreements, why is the number of civil summonses and civil judgments declining?
The answer (in part) can be attributed to: debt counseling.
When a consumer applies for debt counseling/debt review, the creditor is prevented from pursuing legal action against the consumer. This means that the creditor has to wait for the outcome of the debt review hearing, before pursuing legal action – even if the consumer is in default of repayment.
This, in my view, is one of the major drivers in the dramatic decline in the number of civil summonses and civil judgments during the 1st quarter of 2011.
However, a recent decision by the Supreme Court Of Appeal (Collett v Firstrand Bank (766/2010)  ZASCA 78) – delivered on 27 May 2011- is set to change the status quo. The court held that a credit provider was entitled to terminate a debt review proceeding, at any time, if the consumer was in default of repayment terms, under the credit agreement.
This court ruling, now opens the door for creditors to terminate debt review proceedings, the moment the consumer is in default of the repayment terms and enforce their rights under the agreement – by taking legal action. This is a departure from the manner in which debt counseling is currently applied.
Most creditors are still opposed to debt counseling and have done much to thwart its success. I have no doubt, that this new court ruling will result in creditors reverting to old tactics and aggressively pursuing legal action. This is sure to see the number of civil summonses and civil judgments rise dramatically, in the coming months.
If you are not meeting your monthly repayments on loans, talk to a Lucid Living Credit Counselor NOW.
The earlier you address the issue, the more options you have. If you let the situation deteriorate, by doing nothing – you will inevitably have a civil judgment taken against you and be disqualified from obtaining any new credit for a minimum of five years – because of a blacklisting on the credit bureau.