Many prospective home buyers are referred to attorneys by estate agents because of the buyer's credit status and subsequent inability to obtain a home loan.
By the time the client reaches the attorney, he has already found his dream home and signed an offer to purchase. He is in a hurry to get his name cleared so that he does not lose the property to another buyer by the time the offer to purchase reaches its cessation.
What one needs to understand, is that there is a long process involved in removing blacklistings. Each case differs from the next and needs to be investigated before the client can be informed of how long the process will take.
The cooperation of all the parties involved critical to ensuring that the process is dealt with in a shorter time as possible. These parties are/or may include:
The parties that have blacklisted the client
The courts, in the case of judgments.
What is a Credit Bureau?
A Credit bureau is a private business which acquires, records, maintains and makes available to contracted subscribers, information concerning the manner in which consumers conduct their credit and business dealings.
Everyone who has ever applied for credit is listed with the credit bureau. When you apply for credit with a company that subscribes to a credit bureau, that company will have access to your credit history, which is provided by the credit bureau. The company can then make an informed decision and assess their risk in granting you the said credit. Most companies will not grant credit to individuals who have negative listings.
What is a Default?
A default is a listing of a party who has neglected to pay an outstanding amount to another party. Companies who are most likely to list defaulting parties are:
Hospitals; Chain Stores, etc.
A default usually remains listed against your name for 3 years, but in certain cases it can be removed sooner. It is possible to remove a default listed by a medical practitioner or hospitals, provided that the outstanding debt is paid up in full and the medical practitioner or hospital consents to the removal of the default. Companies who are members of the Consumer Credit Association do not remove listings even if the debt is paid up in full. The reason that the Consumer Credit Association gives for this is that they are bound by law.
Most of the chain stores are members of the Consumer Credit Association.
If you find yourself in such a situation, it is advisable to immediately seek legal assistance in order to negotiate with the other party to have the listing removed, or updated to "paid up in full", which will then remain listed for a period of 3 years from the date of submission.
What is a Judgment?
A judgment is a court order compelling the defaulting party to pay the outstanding debt.
By means of this court order, the plaintiff may take further action against the defaulting party in order to recover the outstanding debt. The Magistrates Court has jurisdiction to grant judgment on debt for amounts of less than R 100 000.00. The High Court has jurisdiction for amounts exceeding R 100000.00.
A judgment has to be rescinded before it can be removed. An attorney can apply to the court to have the judgment rescinded. Some financial institutions and chain stores (in the case of Judgment granted in the Magistrates Court) will not consent to a rescission of judgment even if the debt has been paid in full. They will update the listing to read "debt paid up in full". If the judgment is not rescinded, it remains listed for 5 years.
A High Court application for a rescission of judgment is slightly more complex and the process is more costly, and even if the consent of the Respondent is obtained, it cannot be guaranteed that the rescission will be granted.
What is an Administration Order?
If you are not in the position to pay all your debts; these debts are not more than R 50 000.00; and you do not own any other property, which may be sold to pay the debts; you may apply for an Administration Order This will protect you from your creditors and no one may take judgment against you, however, this is temporary. In terms of the Administration Order, the court decides how much you need for basic necessities, and then determines how much must be paid to an administrator. The administrator then makes payments every 3 months to your creditors. The cost of an Administration Order can be very high and you should consult with an attorney to check these costs in order to make an informed decision before a formal application is made.
The Administration Order remains listed while you are under administration and for a further period of five years after that.
Insolvent/Sequestrated and Rehabilitated...
A Sequestration Order is granted when you are unable to pay your debts and your creditors apply to the High Court for an order. If granted then all your assets fall under the control of a trustee appointed by the court. The trustee is responsible for converting all your assets to cash and distributing it amongst your creditors.
A Sequestration Order is effective for 10 years however you may apply to the High Court for rehabilitation at an earlier stage. You automatically rehabilitated after 10 years you do not apply for rehabilitation.
How to prevent yourself from being Blacklisted.
You need to keep your accounts up to date and you should not open accounts if you are not going to be able to pay them monthly. If you suddenly find yourself in a difficult financial situation you should make arrangements with your creditors and honour these arrangements. Also make sure that all your correspondence, in respect of these arrangements is in writing.