• You have not acknowledged the debt in the past three consecutive years, either in writing or verbally.
• You have not made a payment or promised to make a payment toward the outstanding debt.
• You have not been summoned to make a payment by a creditor for the debt within the past three consecutive years. 

The post When does prescription of a debt start? appeared first on Schnetler's Inc.

Buying a property is a rather big deal, which is why you should be sure that you are able to afford it before you end up running into debt. Owning your own home is a very rewarding experience, but there are usually some obstacles along the way. Follow the steps the below to be sure that your new home is your dream home.

1. Make sure you have a healthy credit score

Your credit score lets banks know how well (or badly) you manage your debt. A good credit score improves your chances of getting a home loan.

In order to build up your credit score, make sure you pay all your bills on time, every time. Clear as much of your debt before applying for a home loan. If you don’t have a credit card, you should apply for one to aid your score. Check your status by getting a credit report from a credit bureau.

2. Save up for a deposit

Having a deposit saved makes you more attractive to sellers, agents and banks, which means, if you have a deposit ready, you have a higher chance of getting your loan approved. A deposit also means that your loan repayments will be lower; you’re in a better position to negotiate an interest rate if you have a deposit since there is a lower risk for the bank.

3. Look out for any additional costs

There are a number of additional costs that are incurred when buying and taking ownership of a house, and these may come as a shock to a first-time buyer.

Make sure to account for additional buying costs such as the loan initiation fee, transfer duty, loan registration costs and conveyancing fees. Also ensure that you take additional homeownership costs into consideration, e.g. loan repayments, homeowner’s insurance, municipal rates and taxes, water and electricity, maintenance, and security.

4. Ensure the price is worth it

You should make sure that there are no damages to the property. Be sure to check for any leaks, as it might become a costly and annoying long-term problem.

If you’re planning to make this your forever home, you might want to consider what facilities are available nearby in case mobility becomes a problem. Is there a doctor close by? Are the transport links good?

Conclusion

From this it should be clear that buying a house is a rather complex activity that necessitates a lot of thought, calculating, and logical reasoning. It is advised to obtain the help of a professional to be absolutely sure that the money you end up paying is worth all the possible obstacles that you may encounter.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

The post FIRST-TIME HOME BUYER? appeared first on Schnetler's Inc.

Going about collecting debt can be a stressful and confusing business. It only gets more frustrating when someone who owes you money doesn’t pay it back. If someone does owe you money (a debtor), then there are certain legal steps that can be taken to ensure you get your money back.

Taking legal action against a debtor can be an expensive and time-consuming process, hence the importance of having sound legal advice or the help of an attorney who specialises in debt collection.

An important point to remember is that you should have a legal agreement with the debtor in place before you seek legal action. If not, the process may be far more difficult than you’d have imagined or worse, it could backfire in your direction.

Where can debts be claimed?

Debts can be claimed in the High Court, for debts that are above R300 000. Amounts between R100 000 and R300 000 must be claimed in the Regional Court and amounts under R100 000 must be claimed in the Magistrate’s Court.

What must I do to get my money back?

When claiming a debt, the first thing to do is send a letter of demand to the debtor. The letter should include all the necessary information of the debt such as the details of the transaction, the amount outstanding and the due date for payment. This letter can also contain a threat of legal action should the debtor not pay by the due date.

If the debtor decides to ignore the letter and the threat, then you can institute legal action to recover the money. If you believe it’s not worth it or not possible to recover the full amount, then you can write the debt off, making sure you remember never to give that person money again.

An attorney can help with the process of collecting a debt. It’s important to always consult an attorney about an outstanding debt before taking any action. If you don’t enlist the help of professional attorneys, especially when you are owed a lot of money, you may end up not getting your money back at all from a lack of legal expertise. Furthermore, if you lose a court case, you may also end up paying the other person’s legal fees.

After a letter of demand is sent to the debtor, and they do not pay by the due date, then a summons will be served to them by the Sheriff of the Court. Ten days after the summons has been served, an attorney will take judgement in court against the debtor.

The following process for claiming a debt only applies to those who do not adhere to the National Credit Act (NCA). Businesses that sell credit, for example, will have other requirements to fulfil according to the NCA. All claims must be instituted within three years if you want to get your money back.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Reference:

• Anderson, AM. Dodd, A. Roos, MC. 2012. “Everyone’s Guide to South African Law. Third Edition”. Zebra Press.

The post DEALING WITH A DIFFICULT DEBTOR appeared first on Schnetler's Inc.

Going about collecting debt can be a stressful and confusing business. It only gets more frustrating when someone who owes you money doesn’t pay it back. If someone does owe you money (a debtor), then there are certain legal steps that can be taken to ensure you get your money back.

Taking legal action against a debtor can be an expensive and time-consuming process, hence the importance of having sound legal advice or the help of an attorney who specialises in debt collection.

An important point to remember is that you should have a legal agreement with the debtor in place before you seek legal action. If not, the process may be far more difficult than you’d have imagined or worse, it could backfire in your direction.

Where can debts be claimed?

Debts can be claimed in the High Court, for debts that are above R300 000. Amounts between R100 000 and R300 000 must be claimed in the Regional Court and amounts under R100 000 must be claimed in the Magistrate’s Court.

What must I do to get my money back?

When claiming a debt, the first thing to do is send a letter of demand to the debtor. The letter should include all the necessary information of the debt such as the details of the transaction, the amount outstanding and the due date for payment. This letter can also contain a threat of legal action should the debtor not pay by the due date.

If the debtor decides to ignore the letter and the threat, then you can institute legal action to recover the money. If you believe it’s not worth it or not possible to recover the full amount, then you can write the debt off, making sure you remember never to give that person money again.

An attorney can help with the process of collecting a debt. It’s important to always consult an attorney about an outstanding debt before taking any action. If you don’t enlist the help of professional attorneys, especially when you are owed a lot of money, you may end up not getting your money back at all from a lack of legal expertise. Furthermore, if you lose a court case, you may also end up paying the other person’s legal fees.

After a letter of demand is sent to the debtor, and they do not pay by the due date, then a summons will be served to them by the Sheriff of the Court. Ten days after the summons has been served, an attorney will take judgement in court against the debtor.

The following process for claiming a debt only applies to those who do not adhere to the National Credit Act (NCA). Businesses that sell credit, for example, will have other requirements to fulfil according to the NCA. All claims must be instituted within three years if you want to get your money back.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE).

References:

• Anderson, AM. Dodd, A. Roos, MC. 2012. “Everyone’s Guide to South African Law. Third Edition”. Zebra Press.

The post DEALING WITH A DIFFICULT DEBTOR appeared first on Schnetler's Inc.

On 23 May 2017, the Constitutional Court heard an application for confirmation of an order of the High Court of South Africa, that declared section 118(3) of the Local Government: Municipal Systems Act, 2000, constitutionally invalid.

On 29 August, in a ruling majority written by Justice Edwin Cameron, the court found that upon transfer of a property, a new owner is not liable for old municipal debt.

Section 118 of the Municipal Systems Act

Section 118(3) explains that municipal debt on any property is a charge upon that property and enjoys preference over any mortgage bond registered against the property. However, the question was whether this means that, when a new owner buys the property, the property remains with the debts of a previous owner.

What did the court say?

The court ruled that section 118 (3) is “well capable of being interpreted”, so that the historical debt is not transferred to a new owner of the property.

“What is notable about section 118(3) is that the legislature did not require that the charge (historical debt) be either registered or noted on the register of deeds. Textually, there is no indication that the right given to municipalities has a third-party effect (to a new owner)… It (historical debt) stands alone, isolated and unsupported, without foundation or undergirding and with no express words carrying any suggestion that it is transmissible,” the court said in the judgement.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE).

References:

The Constitutional Court of South Africa

“Concourt rules new homeowners not liable for debts of previous owners”, Ray Mahlaka, The Citizen, 29 August 2017. https://citizen.co.za/news/south-africa/1631149/concourt-rules-new-homeowners-not-liable-for-debts-of-previous-owners/

Jordaan and Another v City of Tshwane Metropolitan Municipality and Others; New Ventures Consulting & Services (Pty) Ltd and Others v City of Tshwane Metropolitan Municipality and Another; Livanos and Others v Ekurhuleni Metropolitan Municipality and Another; Oak Plant Rentals (Pty) Ltd and Others v Ekurhuleni Metropolitan Municipality (74195/2013; 13039/2014; 13040/2014; 19552/2015; 23826/2014) [2016] ZAGPPHC 941; [2017] 1 All SA 585 (GP); 2017 (2) SA 295 (GP) (7 November 2016)

The post MUNICIPAL DEBT INVALID, THE CONSTITUTIONAL COURT HAS RULED appeared first on Schnetler's Inc.

Prescription was introduced as means of protecting South African consumers from dishonest credit providers, who are responsible for recklessly lending credit and have contributed to the detrimental debt crisis many South Africans face today.

What does prescription mean?

• The Prescription Act 68 of 1969 (PA) says that a debt (payment of money) is extinguished/expired after the lapse (passing) of a specific time period.
• South Africa has different laws which specify time periods, for example, the PA says contractual and delictual debts extinguish after 3 years from when prescription starts.
• Prescription may be delayed or interrupted.

It is important to bear in mind that not all debt prescribes after a period of three years. Debt related to a cheque, for example, only prescribes after 6 years. The purpose of prescription in South Africa is to compel creditors and collections agents to collect money owed to them within a specified period and not delay collection so that it accumulates massive amounts of interest and costs.

What are the consequences of an extinguished debt?

• The debtor is not liable to the creditor for a debt after the time period has lapsed.
• The creditor may not institute legal action against the debtor for a debt.

When does prescription start?

As soon as the debt is due (a debt is due once the creditor can identify the debtor and the facts from which the debt arises).

If the debtor prevents the creditor from gaining knowledge of the debt (excluding debts arising from agreements) prescription runs from when the creditor has knowledge of the existence of the debt.

An important point to remember is that it’s perfectly legal for a debt collector or attorney to demand payment for a prescribed debt. It is up to a debtor to raise prescription as a defence.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

References:

https://www.legalwise.co.za/help-yourself/quicklaw-guides/prescription

http://www.debtbusters.co.za/faq/what-is-prescription/

The post DO DEBTS LAST FOREVER? appeared first on Schnetler's Inc.

A creditor who’s claim against a company has not been paid on due date is, as a matter of law, entitled to apply for the liquidation of the company.  If the court is satisfied that the company is unable to pay the debt, a liquidation order will normally be granted, with the often distressing consequence that jobs are lost, assets are sold at far below their value and a business which, if given a respite, would have regained its financial health, ceases to exist.

The new Companies Act, No 71 of 2008, has introduced the concept of business rescue, which is intended to assist financially distressed companies in restructuring their business in a manner that maximises the likelihood of the company continuing in existence on a solvent basis.  Business rescue certainly has its place in the South African economic environment, and its growth and wider application should be encouraged.  There are, however, a number of drawbacks.  The business rescue practitioner has to be paid, and his fee is frequently substantial.  Furthermore, the business rescue plan has to be approved by 75% of the creditors voting interests, and by 50% of the independent creditors (i.e. creditors who are not directors, shareholders or members of the same company group).  If the business rescue plan is not approved, liquidation of the company will be the almost inevitable result.

Item 9 of Schedule 5 to the 2008 Companies Act provides that the liquidation of companies continues to be governed by the applicable provisions of the previous Companies Act, No 61 of 1973 (“the 1973 Companies Act”).  Which brings me to Section 347(1) of the 1973 Companies Act, dealing with the powers of the court hearing a liquidation application.  It provides as follows:  “The court may grant or dismiss any application under s 346, or adjourn the hearing thereof, conditionally or unconditionally, or make any interim order or other order it may deem just …”.

The power which the court has to adjourn the application, or make “any other order it may deem just” is a power infrequently exercised and one which has received insufficient attention by the courts.  That power should, for example, be exercised in conjunction with the power granted a court in terms of Section 354(1) of the 1973 Companies Act, which states that the court may at any time after commencement of a winding up, on the application of a liquidator, creditor or member “and on proof to the satisfaction of the court that all proceedings in relation to the winding up ought to be stayed or set aside, make an order staying or setting aside the proceedings …”.

In Klass v Contract Interiors 2010 (5) SA 40 (W), the court held that the power vested in the court by Section 354 is an unfettered discretionary power.  The court may, in deciding whether a winding up is to stayed, have regard to the wishes of the majority of creditors, and to considerations of commercial morality.  This approach echoes the reasoning adopted in Calgary & Edmonton Land Co Ltd (1975) 1 All ER 1046 (CH).  It is also consistent with a line of cases which state that, in liquidation and sequestration applications, a court may postpone the granting of a liquidation or sequestration order to enable a debtor to pay the claim of the applicant creditor, where it appears that the debtor has realistic prospects of doing so (Rosenbach & Co (Pty) Ltd v Singh’s Bazaars (Pty) Ltd 1962 (4) SA 593 (D);  Payslip Investment Holdings CC v Y2K Tech Ltd 2001 (4) SA 781 (C) at 787-789).

A company faced with a liquidation application may therefore, if it is able to show that it will be able to pay the debt within a realistic time, succeed in averting the liquidation application.  A couple of self-evident and practical points need to be made, in this regard.  Firstly, a company running into cash flow problems must keep its creditors fully informed.  If it becomes clear that debts are not going to be paid on due date, the company should timeously ask the creditors for extensions of time, make realistic proposals as to the payment of any arrear amounts and, most importantly, ensure that it treats all its creditors equally, as regards payments of debts.  A creditor that finds out that its claim has been unpaid, while those of other creditors met, is likely to speedily resort to liquidation or other litigation proceedings.

By managing its creditors in this manner, a company will, if in due course one of the creditors loses patience and brings liquidation proceedings, be able to successfully resist liquidation by invoking Section 354 and the proviso to Section 347(1).

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice.

The post COMPANY LIQUIDATION STRATEGIES appeared first on Schnetler's Inc.

Alecia had big financial problems; she had too much debt and her expenses outweighed her income. She decided to open a new bank account into which her salary could be paid, which would ensure that she could manage her salary before her monthly debit orders went off.

Alecia thought it would be a good idea to pay her small debts off first and then begin with the larger debt. Unfortunately this resulted in her not making any payments at all on her home loan and credit card and the bank threatened to blacklist her and sent her a summons. The bank then made an application in court for an order that made it compulsory for her to pay the amount which the bank set out; this order is called an Emoluments Attachment Order (EAO) or garnishee order. An EAO is granted in terms of s. 65J of the Magistrates’ Courts Act 32 of 1944 and orders an employer (referred to as a garnishee) to make deductions from a debtor’s salary or wages and pay these over to the creditor or its attorneys. This amount was much greater than Alecia could afford and left her with no income for the rest of her monthly debt payments. She was thus put in a worse financial position than before.

If Alecia had known about debt counselling sooner she would not be stuck in the position she is now facing. It is important to educate people about debt counselling, especially in a country where debt is granted so easily and yet so hard to pay back. Debt counselling is a process of assisting consumers that are experiencing debt-related problems and are having difficulty making their current monthly payments, by providing budget advice, restructuring their payments, negotiating on their behalf with credit providers, monitoring their payments and providing aftercare services.

It is the duty of the Debt Counsellor [who is registered with the National Credit Regulator (NCR)] to assess whether the consumer is over-indebted by weighing the income and expenses and then taking into account statutory and non-statutory deductions as well as existing monthly debt payments. If the calculation results in a negative balance, the consumer is declared over-indebted. The debt counsellor provides a proposal that lowers the debt payments and increases the cascades (the number of months allowed for repayment of the debt, inclusive of interest), in order for the consumer to be able to manage his debt while paying it off at the same time. An order is then granted in court and sent to the credit providers, and the consumer can no longer incur any new debt. Once the debt is paid off, the consumer is given a clearance certificate and he/she has all that extra income to buy goods in cash.

Unfortunately, it was too late for Alecia as legal action was already taken against her. The same applies if a termination letter is sent in terms of s.129 of the National Credit Act. It is important for people to know that there is a way to manage their debt, but they need to acknowledge that they are in financial trouble before they are placed in a situation like Alecia. It may be too late for Alecia, but hopefully it won’t be too late for others.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice.

The post HOW TO MANAGE YOUR DEBT appeared first on Schnetler's Inc.