Presently, the percentage of credit card arrears in South Africa is pretty high because of most citizens’ ways of living and outlays. However, these dues may also be the most expensive and challenging of any arrears, mainly at elevated interest rates, charges, and fines. If you have a credit card debt, then all unpaid for precisely seven years, you may wonder what will happen to your debt after the seventh year and if there is a legal way to void it. In this writing, we expound on what unsettled credit card arrears mean for the clients, how prescribed arrears may apply to this subject, and what you might do to pay your debt without initiating a cent payment.
What Occurs To Unsettled Credit Card Debt After 7 Years?
The elements that occur to an uncleared arrears after seven years in South Africa will hang on some facets. It might still be justifiable and collectible, allowing the lender to pursue payments, fix interest and fees, and forward your delinquency to credit agencies. This situation is likely if you’ve made partial payments or have been served with a summons or judgment in the past 7 years. Otherwise, your debt may be prescribed, meaning it’s old and not enforceable by law. In this case, neither your provider nor his collection agency can demand payment nor report your debt to credit bureaus. If you haven’t been making payments in three years – or if you didn’t have any summons or judgment – this may follow. Lastly, writing off your debt is another option, which means the provider stops chasing after payment and creates a void on the debt. It might still market your debt, though, to a collection agency.
When Does Debt Fall Off Your Credit Report?
Your credit report is the history and behavior of your credit, which the provider of credit, such as a bank or lender, uses to calculate your creditworthiness. It is also used by credit bureaus, such as TransUnion, Experian, Compuscan, and XDS, among other listed bureaus, to calculate credit scores.
Your credit report would feature positive and negative credit information related to your credit activity and personal particulars, along with adverse listings, credit accounts, payment history, and credit inquiries. These latter elements denote default or failure regarding respective credit obligations that might impact various constituents of your credit score and future credit access prospects.
However, these listings don’t stay in your report forever. Different retention periods for various types of adverse listings are stipulated by the National Credit Act of 2005 in South Africa:
- Credit inquiries: Twelve months
- Missed payments, Defaults, Judgments: 5 years or until paid and a paid-up letter is provided
- Debt restructuring: Until a clearance certificate is issued
- Sequestration: ten years or until the authorization of the rehabilitation order
Most adverse listings can stay on your report for up to five years, some even up to 10 years or longer. However, proactive initiatives such as settling debts, disputing mistakes, or processing rehabilitation might erase these listings, boosting your credit grading and maximizing your odds of receiving loans.
Can Credit Card Dues Be Written Off After Seven Years?
Having unsettled arrears written off after seven years in South Africa rests on whether it’s prescribed. Prescribed debt is old, unenforceable debt. In South Africa, most debts, including those from a credit card, are prescribed if no legal action has taken place or payment has been received for three years. Once prescribed, your provider or collection agency can’t then legally demand payment or report your debt to credit bureaus.
However, prescribed debt isn’t the same as written-off debt. The provider cancels written-off debt, but unless it’s already prescribed, they may sell your debt to a collection agency. Your debt may also be impacting your future credit score and credit access.
Writing off your credit card debt after 7 years means ensuring it is prescribed and not acknowledging or paying anything. If unprescribed, you’re still accountable for it.
How Can You Clear A Credit Card Due Without Paying?
For those with unsettled, un-prescribed, or un-written-off credit arrears, you still need to settle the dues, and your lender or a collection firm may pursue legal action against you. However, if such a case arises, you may consider options to manage your debt:
- Negotiate a settlement, for example, offer a lump sum payment of less than your total debt in exchange for the rest being written off or settled. This requires cash and something in writing from your provider or agency.
- File for bankruptcy: A legal process that declares you insolvent to sell assets to pay off debts. It has serious consequences, including loss of property, damage to credit scores, and the effect on future employment opportunities and business.
- Similarly, go for debt review or counseling. A formal debt counselor evaluates your financial position and negotiates with credit providers to reduce interest rates and lengthen the term periods while lowering the amount of monthly repayment installments. You will make only one affordable payment to their distribution agency, which, in turn, shall distribute the money to your creditors. This option attracts fees and bars further access to new credit until all debt is cleared and a clearance certificate issued.
