​Struggling to pay off debt? Dreaming of having it written off? This is a common experience for many South African consumers making repayments and handling their debt.

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But is it a possibility? According to experts, the answer lies in whether your debt is prescribed or not. Prescribed debt can be written off if all the relevant conditions are fulfilled. In most, if not all, other cases your debt will not be written off.

Let’s take a look at the concept of prescribed debt and how it works, so you can better understand if it is relevant to your own financial progress.

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What is prescribed debt?

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Prescribed debt is a phrase used in the financial industry to refer to amounts that are no longer required to be repaid by consumers, due to the fact that a specific time has elapsed. In other words, it means the debt has expired.

Debt that has not been recognised by the creditor or has not been paid towards for more than 36 months - in most cases - is considered to be prescribed.

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There are also different time specifications for different loan types when it comes to prescription time. For example, a mortgage bond and judgment debt can only be prescribed after 30 years.

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The conditions for prescription of debt are:

• You have not acknowledged the debt in the past three consecutive years, both in writing and verbally.

• You have not made a payment or promised to make a payment to the outstanding debt amount.

• You have not been summoned to make a payment by a creditor for the debt within the past three consecutive years i.e. non-recognition by a creditor.

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What does it mean when debt is written off?

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In short, it means that the debtor no longer has to make the repayment. More technically though, what has happened is that the creditor has “decided” (most likely forcibly, by law) to nullify or disregard the amount that the debtor had to repay.

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What is non-recognition of debt by the debtor?

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It is important to note that non-recognition of debt means having made no payments, never receiving any collection communication, or never being issued with any notice of legal action from the creditor.

For all intents and purposes, the debt must have been completely forgotten about by both the debtor and the creditor. There must have been no contact regarding the debt from either side.

This is the only way to confirm that the debt is old and thus is allowed to be written off.

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The National Credit Act 2015

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In the past, creditors would often ignore the debt, allow it to gain interest, and then pursue collection after the debt had accrued and became substantially more than the original amount.

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Consumers who were often not as financially clued up on their rights when it comes to this process had to fork out exorbitant amounts. This is because it was fully up to the consumer to know about the prescription of debt, to understand it, and to argue it as a defense for not having to repay the old, forgotten debt.

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However, since 2015 - due to amendments made to the National Credit Act (NCA) - it has been harder for creditors and collectors to regain this debt. Though, collectors will still try their luck and insist that the consumer is liable to pay.

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How do Creditors get you to Acknowledge debt

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The most common tactic is to get the consumer to acknowledge the debt through incessant communication.

In other words, creditors call, message, and mail consumers unrelentingly, forcing the consumer to engage with them. As a result, the debt that was on its way to being prescribed is then recognised and the creditor then has grounds to pursue collection.

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What happens if you don't acknowledge debt

The answer to this would depend on the circumstances.

If you have not acknowledged your debt, you are still within the 36-month period, and the creditor has reached out to you, then the creditor may take action against you. They could approach the court to make a judgment against you, and you may receive a summons.

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What happens to unpaid debt after 3 years in South Africa?

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In the case that you don’t acknowledge your debt, you forget about it, and so does the creditor (i.e. they make no effort to approach you or communicate with you regarding the debt), then after 3 or more years it will be prescribed.

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What does it mean to default on your debt?

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Defaulting on your debt means that you have failed to make the required payments. This often happens when people have too many debts to pay and cannot keep up with all their accounts.

Of course, a saving grace would be that debt has been prescribed. Find out if you have prescribed debt by filling in our form for a free call-back and debt assessment.

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Get Prescribed debt for certain loan types

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Time specifications afforded to certain loan types is an important consideration for the prescription of debt.

According to experts in South Africa, there is a distinction made between

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Loan Group A:

• personal loans

• vehicle loans

• credit cards

• store accounts

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Loan Group B:

• home loans

• court-ordered debt

• debt owed to the South African Revenue Service

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This distinction details that Group A may be considered prescribed if the debt has not been recognised for three or more years.

Group B needs to have not been recognised or paid towards for thirty years.

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What happens to your credit score if you do not repay your debt?

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When you fail to pay your debt, your credit risk gets higher and higher, thus damaging your credit score. Once it gets to a certain point, you will be considered too high risk to receive any more loans or credit accounts.

In addition, the credit bureaus will be aware of your dropping score and will list you as over-indebted.

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Can I simply ignore debt until it goes away?

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This does not mean that you should ignore your debt.

Ignoring your debt could lead to the repossession of assets or further legal action that could see you having to fork out far more than the original debt amount.

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Simply hoping for your debt to be prescribed is not a viable option. In most cases, the creditors will not forget about your debt. And, because of more stringent laws, creditors have become more consistent in their communications regarding debt. As such, the likelihood of debt prescribing is low.

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What to do if you are struggling with debt repayments?

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If you are struggling with keeping up with debt repayments, we encourage you to contact us for a free debt assessment and the necessary debt assistance.

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Not only will we protect you from legal action and repossession, but we will be able to identify whether your debt can be considered prescribed. If so, we will make it our duty to ensure that the correct course of action is followed.