With the economy as it stands at present, it is not uncommon to see consumers making the crucial mistake of taking on Personal Loans to cover their debt.

This desperate decision will only provide a temporary relief from Creditor’s demands, as you will now have an additional debt to service. You will now have a Personal Loan and the previous months creditors to repay, not to mention added interest that will be payable.

Some consumers merely continue this process month after month, until creditors refuse more loans. By this time, you will have dug a hole so deep that it will be difficult to see the light of financial freedom. At this point you will most certainly be over-indebted and will mean that you are unable to service your debt installments and your living costs for the month.

What To Do Now?

This is where your personal finance house of cards starts to fall apart and you’re your telephone rings uncessantly. You will receive constant phone calls from your creditors, both day and night, requesting payment on the accounts. Some consumers opt to change their cell number, which is what I call the Ostrich approach, you stick your head in the ground and act like as if there are no problems. This approach works , for a short period, till reality intrudes and the creditors start to call you at your place of work. This can be embarrassing to you and irritating to your employer and colleagues, which could lead to your dismissal.

The Debt Collection Legal Process

Usually credit providers allow consumers to default on two installments prior to proceeding with legal action in order to recuperate the outstanding balance.  Collection agents or attorneys acting on behalf of your credit providers usually follow the legal process as set out below:

  • The legal action is initiated by issuing a final demand letter. This will be posted in order to notify you of the action being instituted. You should respond to this notice within 10 business days in order to avoid the further action and preventable collection costs.
  • Should you fail to respond to the aforementioned notice a summons will be served on you by the Sheriff of the Court. Once again you have 10 business days to enter an appearance to defend. This could be done by completing the appearance to defend paragraph in the summons and returning the summons to the Clerk of the Court where the summons was issued from. The clerk of the Court will provide you with a hearing date on which you can state your case in front of the Magistrate.
  • Failure to respond to the summons will result in an application for default judgment. Once the default judgment has been granted one of two further applications is usually instituted. The former being a financial enquiry which would require your attendance at the Court hearing. Failure to attend this hearing will result in the Court issuing a warrant for your arrest. The Court will then decide what your monthly installment must be on the outstanding debt. Alternatively the attorneys will apply for a Warrant of Execution. Once granted the Sheriff of the Court will take inventory of your assets and same will be sold on auction to settle the outstanding debt.

RELATED: How Debt Review Works

Should you find yourself to be over-indebted, you still have viable options.

  1. Contact your creditors and arrange a payment schedule which is acceptable to both parties, if this is not possible then:
  2. Consult a registered Debt Counsellor and arrange for them to liaise with your creditors on your behalf by means of the Debt Review process and lead you on the path to financial freedom.