South Africa has one of the lowest saving rates in the world with reasons including low disposable income, low growth in income, low employment rate, high tax rates, the high inflation and little confidence in the South African economy. However, add to the above, the eminent debt problem in South Africa with over half the credit-active population being over-indebted and it becomes clear why so few people save money for rainy days and their retirements.

Reports have shown that over 64 percent of income is spent on daily living costs, with many people paying the majority of their income to service debts. This leaves people in situations of having to buy food on their credit cards or having to make use of micro-loans to get money for living expenses.

Failure by companies to increase salaries or contract wages annually also leaves consumers vulnerable. Although the monthly expenses increase, their incomes don’t grow to keep up with the high living costs. It leaves very little money for savings, as is evident in fact that less than a third of parents save up for their children’s tertiary studies and under a fifth of households in the over R40 000 annual income bracket have investments in the form of unit or mutual fund trusts.

The non-saving attitude translates into financial problems when it comes to retirement, with under 7 percent of South Africans being able to be financially secure when they retire. It means more financial pressure on families to take care of their parents, leading to situations where people have to borrow money to keep up with parental care costs, thus adding to the escalation of debt in South Africa.

Over 75 percent of income earners in the country are broke before the end of the month. As such, the majority of South Africans live one month away from financial disaster. Should anything unexpected happen, they are unable to pay for such from their income and must borrow money. The poorer communities are especially affected, as many use a third of their daily income to pay for transport to and from work.

Consumers are, however, ignorant regarding the means to break their debt cycles. They attempt to negotiate repayment periods with debt collectors and at the end of the day, they sign forms putting them in debt for years to come. Debt collectors often also attempt to collect on expired debt and with consumers unaware of their rights, many of them fall victim to long repayment periods.

Solution

Sequestration is one of the best methods to get rid of debt in South Africa. The debtor’s attorneys apply to court for voluntary surrendering of the consumer’s estate. The option is suitable for individuals who have home loans that they cannot repay or large amounts of debt, but have assets that can be sold to ensure benefit to the creditors.

Once sequestrated, the consumer is free of up to 80 percent of the debt, with the remainder payable in a cash lump sum or through negotiation over a period of up to 24 months. Creditors cannot harass the consumer and any income after sequestration is free from claims by creditors.

For people who have less than R50 000 debt, there is the option of administration. For people with debt that can be repaid over a period not exceeding five years, but without having enough assets to qualify for sequestration, debt review is an option.

The first step in dealing with debt in South Africa is to gain expert debt management and sequestration guidance. Call our team for help today.