Car Repossession! What Happens and How To Save your vehicle.

Car repossession troubles? We have compiled this article to explain the process and what to do to save your vehicle. Currently, South Africa is going through a rough patch due to the Covid 19 pandemic, a slowing economy and electricity costs are always on the rise. 

Indeed, times are tough, and it is only a matter of time when the economy will affect you. Those who are already struggling with debts experience that they cannot afford their living expenses. With all these hurdles to overcome, many consumers are faced with the reality where their car might get repossessed. 

Repossession of a car can leave you in a state of emotional distress. There are also the agony and shame people feel when collectors come knocking on the door to repossess. Everything soon feels amiss, especially when you have kids. How will you take them to school? Or worse, what about medical emergencies? So, it is understandable that everyone wants to protect the possession of their vehicle. But what happens if you can't afford to pay the instalments anymore?

Your brain will be working overtime causing sleepless nights and even depression. Although you have the right to get worried, there is a legal process that we will discuss in detail to avoid the repossession of your car. This process we are referring to is debt counselling, which is also known as debt review. This process will protect and teach you how to protect your vehicle and other assets. Indeed, repossession of a car can feel like a knife in the gut, but there is one uncomplicated way out. 

Your savior: Debt review. Care to know what Debt Counselling in South Africa is? 

It's a process that's going to save your vehicle from getting repossessed. We will discuss in detail how this process will afford you legal protection against repossession.

But first, we will discuss the vehicle repossession processes in detail. This information will assist you to overcome this stressful situation when faced with car repossession.

When Does a Bank Attempt Repossession? The first 90 days of the repossession process.

Your vehicle is at stake when you stop making payments that are due monthly. These instalments are the agreed-upon specified instalment as stipulated in your finance agreement.

Not paying your monthly instalment for one month in certain circumstances might be justifiable. If you let three months go by without payment to the credit provider, that's when things will start turning for the worse.

Banks will start the repossession process after receiving no instalments for two to three months. The bank will first commence soft collections to try and collect any arrear amount. They will try to reach out to you by contacting you via e-mail or telephone. If you don't respond and ignore these calls and e-mails, consider yourself in trouble. Most consumers make a mistake and avoid the situation entirely thinking the problem will go away. Ignoring the problem will escalate the collections process and will jeopardies any future payment arrangements with the bank.

Finding a collector who wants to repossess your vehicle at home or work might be a frightening idea, but we will explain how to deal with the repossession of the car.

Keep reading to find out more.

Car Repossession and Voluntary Surrender. 

The future of a consumer's ability to repay debts always remains unpredictable. Life has a way to surprise us with unforeseen crises such as medical emergencies, life-threatening illnesses, retrenchment or even divorce. These sudden surprises can make it challenging to repay debts and vehicle finance accounts on time. 

When it comes to a car, there are two things that you can get confronted with if you haven't been paying for the vehicle you bought using bank finance, namely voluntary surrender, and repossession.   

Car Repossession.

Vehicle Repossession will harm your credit report. This negative information will cause any future credit applications to get declined. 

A bank can only repossess a vehicle through a court order. After exhausting all avenues to collect the arrears on a delinquent vehicle finance account, a bank will approach a court to repossess your vehicle. We know it seems daunting, but you have options to prevent this court process from proceeding. We will discuss the debt review process later in this article. 

The Consequences of Repossession.

A large majority of struggling consumers ignore a summons and don't appear for the court hearing. The court will grant a default judgement in the bank's favor if the consumer does not appear to defend the summons. The bank will now have the required court document to repossess the vehicle. 

On the other hand, if the purchaser goes to court to defend the matter, they can present their defense. Here, getting an attorney to assist would be helpful.

Voluntary surrender: if you have not defaulted on any payments but can no longer afford the instalment.

A voluntary surrender occurs when you are struggling with the monthly payments, and you decide with the bank to return the vehicle. The National Credit Act states that you can provide a written notice to the bank indicating that you want to return the car. This voluntary surrender means that you will lose the vehicle and potentially must pay any shortfall amount after the auction. Surrendering the car voluntarily allows you to avoid the embarrassment of repossession and expensive legal fees.

Within five business days, you must surrender the vehicle to the bank. After the bank accepts your car, they will send it for an evaluation to determine the value. The bank will send you the valuation value. Next, the bank will recondition the vehicle to ensure the car is ready for auction. Any reconditioning work which gets done will be added to the outstanding balance. The credit provider will then auction your vehicle to recoup some of the costs.

There are no guarantees that the bank will sell it for the amount which is still owing on the contract. You need to pay any shortfall amount after the vehicle gets auctioned. Similarly, if your car gets sold for a higher price, any excess balance will be refunded to you. Please note that this does not happen very often, and, in most cases, there will be a shortfall. 

The Consequences of opting for a Voluntary Surrender 

There will always be a downside when trying to deal with debt and missed vehicle payments. Banks will come knocking as soon as the vehicle finance account is two or more months in arrears. It is a fact that banks prefer not to repossess vehicles. Unfortunately, if you are not making payments to cover the interest, they will proceed with repossession. The banks prefer voluntary surrender as opposed to lengthy court proceedings to get their assets back. Consumers need to be aware that they are under no obligation to return their vehicle at this stage if they don't want to. 

The credit provider will first get collectors to give you the option to surrender the vehicle voluntarily. The collectors will present you with a document when they come to collect. If this document is not a court order, it is an agreement to surrender the vehicle voluntarily. 

It is important to note that you do not have to sign this document or surrender the vehicle during this stage. Never give in to these sometimes-aggressive collection practices from the collectors when they want to repossess. Some external collectors, who are not employees of the bank, will mislead the consumer into believing that the document they present is a repossession order.

If you can settle the arrears, contact the bank, and arrange to pay the arrears. If you're unable to pay the arrears and are willing to surrender the car, you can do this at this stage. If you are unwilling to return the vehicle at this stage, it is vital to contact us to get legal protection using the debt review process. 

Get Some Help with Your Debt. Before the bank approaches a court for a repossession court order.

According to a reliable resource, almost 50% of South Africans with credit accounts are in debt with delinquent accounts. Many people end up on the wrong side of debt collecting agencies, or worse, they apply for further credit or loans to pay off their current debt, only to discover themselves in remorse. Therefore, get help today!

If you need one of our consultants to contact you, you can use one of the following:

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Your solution to vehicle repossession. Debt review/ debt counselling

The National Credit Act provides for debt counselling to deal with debt and the safeguarding of assets. If you get into the unfortunate position where the bank wants to repossess your vehicle debt review will be your answer against repossession. 

This debt review process helps consumers who are struggling with their repayments through legal negotiations with credit providers. The debt review includes budget advice and debt restructuring.

There's more to debt counselling than budget advice, safeguarding of assets and restructuring of debt. We will dive into the details. 

Car repossession - Above is an infographic of the five stages of repossession.

What is Debt Counselling?

Debt counselling is a debt relief process in South Africa that helps customers get out of debt. The program was initially introduced in 2007 by the National Credit Act (NCA). Debt review aims to assist consumers in protecting their assets. The process also aims to combat high debt levels. This process is perfect for South Africans who find themselves overindebted. This process also aims to assist consumers who are falling deeper into debt and not having the ability to deal with it.

Debt review is uncomplicated and a more reliable solution than most consolidation loans. Consolidation loans often turn out to be a short-term solution and do not combat high debt levels. We recommend you contact us to enquire if this process is the best solution for your situation. Moreover, if you are suffering from over-indebtedness, you can approach a debt counsellor to guide you through the legal process. This process is more than just a rescue plan; it is a systematic approach to deal with debt and car repossessions. 

Within 120 days of the car repossession process, it is vital to apply for debt counselling. Contact us immediately when faced with repossession. We will stop the repossession process and restructure your vehicle finance account together with all your other debts.  

We will now discuss the benefits of debt review.

Benefits of Debt Counselling/Debt Review 

An inexpensive monthly budget

While taking part in the debt review process, your debt counsellor will present you with a new and affordable monthly budget. This new budget will include a repayment plan altered to your

living expenses. You will now be able to afford your monthly living expenses while paying off debt and your vehicle. During the process, you will receive guidance and advice on how to handle your funds to ensure a happy and debt-free future.

Restructuring of debts 

Your debt counsellor will restructure your debts and soon after you will enjoy legal protection while paying a reduced instalment. The only requirement from your side is to ensure this reduced instalment gets paid each month. 

Negotiating with credit providers

The debt counsellor will deal with credit providers. The consumer will no longer need to deal with collection agencies and creditors. Negotiations are easier under debt counselling. The debt counsellor will be responsible for this. The focal point of discussion would be to prolong your debt repayment terms to reduce the monthly instalment. 

Read more about the benefits of debt counselling.

You May Require Debt Counselling / Debt Review If:

Here is when you need to approach a debt counsellor:

1. Your credit card, clothing and revolving loan accounts are all maxed out.  
2. You have missed payments on your debt obligations.  
3. You don't have enough money left to pay for living expenses
4. You feel depressed about your finances
5. You are selling some of your goods to pay for living expenses and to pay for debt instalments. 
6. Instead of dealing with your current debt situation, you are applying for more loans.

Read more about the debt review costs involved when you opt for this process.

Avoiding Repossession

It is possible to dodge repossession as advised above through debt counselling. As soon as your payments start to pile up or you can't manage the repayments on your debt, take immediate action. Do not wait until the debt collector visits you at home or office to repossess. Negotiations with your credit provider will fail without the help of a debt counsellor. 

If debt counselling is not a viable solution for you, you could also opt to sell the car and go with something within your budget to control your finances. Please keep in mind to purchase a vehicle on finance again needs a clean credit record with a decently high credit score. If you need to increase your low credit score you can read our guide by clicking the link.

Debt Review FAQ

Click the link above to read our frequently asked question about the debt review process or apply by clivcking the link below.