Judgments Fall But Bad Debt Still High

John Vaughan (Financial Advisor) @ Lucid Living

While data published by Statistics SA (Stats SA) showed that the number of civil judgments recorded for debt continued to decline steadily in March, South African consumers remain highly indebted.

The figures published by Stats SA show a 13,4% decrease in the total number of civil summonses issued for debt in the first quarter of 2011 compared with the first quarter of last year. A 10,8% year-on-year decrease was recorded in March this year.

The total number of civil judgments recorded for debt decreased by 21.3% for the first quarter of 2011, compared with the first quarter of 2010. A 22,1% year-on-year decrease was recorded in March this year.

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.

However, household debt as a proportion of disposable income is still high. Last year, it receded from 78,7% in the third quarter to 77,6% in the fourth quarter. This is not very far off 2008’s peak of 82%.

“Demand for credit by the household sector remains constrained by high debt levels,” Reserve Bank Governor, Gill Marcus said.

According to Ms Marcus, “The ratio of impaired advances (defaulting loans) to gross loans and advances has remained at around 5,8% since December 2010, mainly attributable to retail debt.” “The fact that this ratio has not declined further over the past six months is cause for concern.”

Many economists and market traders expect interest rates to rise later this year. This will make repayments on home loans and other debt more expensive for those already struggling with debt.

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.