Unfortunately, retrenchments are becoming a more frequent occurrence these days. Your best chance of financial survival is to ensure you have a carefully devised plan of action.
Here are five things you can do to take control of debt after retrenchment
- Revise your budget
- Register your UIF claim
- Contact credit providers
- Postpone your payments
- Consult a financial planner
1. Revise Your Budget
A budget is crucial no matter what your financial position, but it becomes even more of a necessity when you are retrenched.
The best way to start drafting this is to make a list of all your essential living expenses, only absolutely necessary for survival, and allocate an amount to each of these.
Then peruse your bank statements in order to list and categorise everything you spend money on. Review your list of expenses and identify unnecessary expenses which can be canceled or reduced in order to provide financial relief during this period.
2. Register Your UIF Claim
It is most likely that you are registered for UIF and have been contributing to the same since you have been employed. Your monthly contributions will reflect on your salary advice.
Seeing that you are retrenched you are entitled to claim unemployment. In order to claim this benefit you will require the need to the following documents:
- Form UI-2.8 for banking details (visit www.labour.gov.za to download same);
- Form UI-19 (visit www.labour.gov.za to download same);
- Proof of registration as a work-seeker.
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Once you have the above documents in order visit your nearest Department of Labour office.
3. Contact Your Credit Providers
Debt payments will still be due and payable after you have been retrenched. Should you have any long or short term loans it is very likely that you have credit life insurance.
This is to cover the outstanding balance of the loan in the event of death, but usually also provides for a retrenchment scenario wherein the insurance covers your loan instalment for a period of up to six months. Request a copy of the policy from the relevant credit provider/s to peruse the terms of same.
4. Postpone Your Payments
Contact Debt Review Centre for information regarding a Payment Postponement application.
This provision in the Act states that a Debt Counsellor may make a proposal to the Magistrate’s Court to Order that the payment date on credit agreements be postponed to a future date.
5. Consult A Financial Planner
It is imperative that you consult with a financial advisor. In the event that you have contributed to the company’s provident fund during your employment, the pension fund will now be paid out to you.
Planning how to utilise or invest these funds should be discussed with your financial planner to ensure optimal allocation. The first thought is often to use these funds to settle the outstanding debt, but it is hardly ever the best option.
Also, discuss your current insurances and policies with the financial advisor in order to ascertain whether any of your current cover can be canceled or suspended in order to provide some financial relief until you are reemployed.
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What Happens To Debt After Retrenchment? (In more details)
Retrenchment is always unfortunate. It changes the urgencies of families and definitely results in a reorganisation of monthly payment priorities.
Credit Providers generally allow a two-month “grace” period for consumers to bring payments up to date. Failing to do so will result in the Credit Provider issuing a Section 129 Notice (also known as a final demand letter) to the consumer.
This notice provides the consumer with an opportunity to contact the creditors and make repayment arrangements. Ten business days thereafter the credit provider’s attorney will issue the consumer with a summons.
Subsequently, judgment will be obtained and sometime later the Sherriff of the Court will arrive at your doorstep to write up your household goods. These items will eventually be sold on auction to settle the outstanding debt.
All of this is avoidable to some extent. The National Credit Act provides for these scenarios in Section 86(7)(c)(ii)(cc). This section reads as follows: “if as a result of an assessment conducted in terms of subsection (6), a debt counselor reasonably concludes that the consumer is over-indebted, the debt counselor may issue a proposal recommending that the Magistrates Court make an Order that one or more of the consumer’s obligations may be rearranged by extending the period of the agreement and postponing during a specific period the dates on which payments are due under the agreement”.
This application is also known as a “Debt Freeze” application as all interest and fees are frozen for this period. In practice, we often use this section of the act in cases where consumers were retrenched and there is a reasonable prospect that they will find employment within six months.
This provides the consumer with “breathing space” from their debt obligations and the opportunity to actively seek alternative employment without the risk of legal action or judgments being granted against them.
Unfortunately, should their situation remain unchanged after the six month grace period have lapsed there is no extension hereto and payments to creditors would need to commence immediately.
In the instance where consumers managed to find employment during this period and are still over-indebted, we simply launch a Debt Review application for these consumers and restructure their debt repayments which include the arrears on these accounts into a new repayment plan. Should you have any queries herein, you are welcome to contact our office at 041 365 4139.