What happens when you cannot afford your car instalments anymore?

First and foremost, remain calm. The bank or financing firm cannot just show up and repossess the vehicle, there is a legal process that must first be followed, and you need to understand it in order to protect yourself. You should know your legal rights and what the law dictates in a matter such as this. If you encounter such an event, get into contact with a Debt Mate Counsellor as quickly as possible!

What to do when confronted by a debt collector looking to repossess your vehicle ?

Do not be intimidated when a debt collector trys to take possession of your car, and hands over a form for you to sign. You are under no obligation to sign such a form, also known as a “Consent to Voluntarily Surrender” letter, and hand the vehicle over to the debt collector. Know that any bank form that you sign, other than a Summons which would be delivered via the Sherriff of the court NOT a debt collector, is likely an agreement stating that you’re voluntarily giving the vehicle back.

Unfortunately debt collectors and credit providers often blatantly bully and harass consumers into signing such a letter. They threaten large amounts of legal fees and penalties that you will inccur if you do not sign the form. This is purely a scare tactic to make you give in, DO NOT SIGN. If such "debt collectors" threaten to call the police, invite them to do so, without a court order, these debt collectors cannot take any of your possessions and after you have declined to sign the form, they have no right to be in your property or even speak to you, if they continue, YOU call the police, harrassment and trespassing are both crimes in South Africa.

We want to make it blatantly clear that you are under no obligation to sign anything at this stage. Your first port of call is to contact a debt specialist such as Debt Mate or a legal aid that can review the matter and provide you with sound expert advice. Do not be rushed into making a dire legal decision before reviewing your options, such is your legal right!

So how do vehicles get repossessed?

There are two legal ways in which a bank, or vehicle finance company, can take possession of your asset.

• Court Order/

  To begin with a court order, which is known as a Warrant of Execution, must be obtained by the bank/finance house. This in turn will be an order from the court informing you to allow the creditor to take back possession of the vehicle. If there is no court order however, they cannot force you to give your car back, and that is the law!

• Voluntary surrendering of the vehicle

  You may give the vehicle back via voluntary surrender in terms of the National Credit Act. The voluntary surrendering of a vehicle is what most credit providers try to get consumers to do. Why? Because it’s the easiest, quickest and cheapest means for the credit provider to get their vehicle back.

Voluntary Surrender

This option is only a good one if you are not in arrears on your car installments, so pursue this option only if the vehicle is up-to-date with payments. If at this point end up in the situation where you find that you can no longer afford to pay for your vehicle, and not yet in arrears with the vehicle payments, you can choose to make use of Section 127 of the National Credit Act (NCA) and voluntarily surrender your vehicle.

To initiate this process, you must first provide written notice to your credit provider stating that you wish to terminate the credit agreement and that you require them to collect the vehicle. As stipulated by the National Credit Act, the credit provider must then deliver to you, a letter within 10 working days, indicating the estimated sale value of the vehicle. You may dispute the sale value if you are not pleased with it, you may then proceed by withdrawing your notice to surrender and resume possession of your vehicle once more.

When it comes to voluntary surrender, the bank/credit provider is obligated by the Act to sell the vehicle as soon as possible, and for the best price reasonably obtainable at the time. This is an important statement, because if your vehicles resale value is very low at that time, you cannot expect to get a reasonable price.It is also important to realise that when the vehicle is sold at an auction, you are still held liable to pay any shortfall if the vehicle is sold for less than the outstanding balance owed on the account. For example the repayment plan is valued at R90000 but the vehicle is sold for R60000, this means that you still owe the credit provider R30000 ! Quite literally you could end up paying for a vehicle you don’t even have in your possession anymore.

Ensure that you understand the terms and conditions of the Voluntary Surrender process, if you are uncertain about any part of it, contact a legal aid service or a Debt Mate counsellor to help you.

Court Order / Warrant of Execution

This option applies if you are in arrears in your vehicle instalments and the credit provider wants to sue and obtains a court order, i.e. Warrant of Execution, for the repossession of the vehicle, a Summons must first be served upon you. A court date for appearance will then be set, which will be stated in the Summons, whereby you can go and present your case in court before the residing Magistrate.

This is why it’s important to make sure that your credit provider always has your latest physical address on record. For without it the Summons will still be served, most likely to an old address, but you won’t know about it; and subsequently you will also not know about the court date or be able to appeal your case in court.This means that a “default judgement” will be granted against you, because you didn’t appear in court which is automatically considered an admission of guilt, and in favour of the credit provider.

If you tried to negotiate with the credit provider for an adjusted repayment plan, the Magistrate might actually understand. There could be some sort of leniency in the matter whereby the Magistrate could possibly suggest a reduced monthly premium over a longer period, to accommodate both parties. Though, if there is no record of negotiations between both parties, the vehicle very may well be awarded to the creditor. Who will then sell the asset at any cost they deem reasonable to cover their expenses. This means that you may still end up paying the shortfall, if it was sold for less than your outstanding balance.