What does it mean to be blacklisted?
If you have been late in paying your accounts or have failed to pay them, a negative listing can be recorded on your credit profile in the form of a notice, judgment or adverse listing. Both individuals and companies can be blacklisted.
If any of these listings appear on your credit profile, you will probably find it very difficult to buy anything on credit or to obtain finance of any kind. People who have been blacklisted can often not open bank accounts and might even struggle to find employment. If you are able to get finance, you might have to pay a higher interest rate or put down a large deposit. If you have been blacklisted it is important to clear your name as soon as possible.
Clearing your credit profile is unfortunately not as easy as just paying your outstanding debts. Once you have been blacklisted, you can have a bad credit report for up to ten years, depending on the type of listing that you have against your name. You need the assistance of a specialist legal practitioner to improve your credit rating. Hahn & Hahn Attorneys has years of experience assisting individuals and entities with credit bureau clearance so we should be your legal practitioner of choice.
What is a Credit Bureau?
When you apply for a loan, bond or open an account you give your creditor permission to send your personal information to a credit bureau and from the very 1st month every payment missed or made is recorded at that Credit Bureau.
A Credit Bureau is a ‘library’ of credit information, providing a centralized database of consumer credit behavior i.e. how well you manage your credit commitments. This information could either be positive (i.e. accounts that are up to date, or fully paid up); or negative information pertaining to judgments and adverse credit information of defaulted credit accounts. Credit bureaus provide vital information to credit providers to prevent over-indebtedness of consumers and the granting of reckless credit. There are numerous credit bureaus in South Africa, the three main credit bureaus being Transunion, Experian & Compuscan. Most of the major credit providing companies use these three credit bureaus to vet any prospective clients that may apply for their services. The ultimate goal of a credit bureau is to reduce the credit risk associated with a financial transaction. Information stored by a credit bureau is a combination of both positive and negative information. A positive credit report will not only help you obtain credit, it will assist you in negotiating better interest rates on your accounts.
The Hahn & Hahn Way
Numerous companies claim to be able to help you clear a bad credit profile, but many of them are not really in a position to do so. Hahn & Hahn Attorneys has 15 years’ experience in credit clearance and helping people restore their credit worthiness and are expertly positioned to do so. The types of listings which can be recorded on your credit profile are broken down into categories:
- 1.1 Sequestration
- 1.2 Rehabilitation
- 1.3 Administration Order
- 1.4 Debt Review
3.Adverse (Default) Listings
1. Notice Type Listings
Sequestration is when a person is declared insolvent because their liabilities are greater than their assets; Sequestration is sometimes referred to as bankruptcy or insolvency and can be either voluntary or compulsory.
Voluntary Sequestration is when the debtor him/herself applies to court for the acceptance of the “surrender of his/her estate”. A court can accept the surrender of the debtor’s estate and grant the Sequestration order only if it is satisfied that: the debtor’s estate is in fact insolvent, the debtor’s estate is able to pay for the costs of Sequestrating the estate and that the Sequestration is advantageous to the creditors. By law a person will only be treated as insolvent once his / her estate has been sequestrated by the court. A Sequestration Order is a formal declaration stating that the debtor is insolvent.
When a Sequestration is granted the court will appoint a Trustee who will be in control of the debtor’s estate. The debtor will surrender all his/her assets to the Trustee who will in turn sell the assets to defy the administration costs and pay a possible dividend to the creditors in accordance with the respective ratings. Any debt existing prior to Sequestration is unrecoverable after rehabilitation
The second way in which a debtor’s estate may be sequestrated is called “Compulsory Sequestration”. This type of Sequestration is made on application by one or more of the debtor’s creditors. A court may grant an application for the sequestration of a debtor’s estate if it is satisfied that:
The applicant (creditor) has established a claim against the debtor
The debtor has committed an act of insolvency or is insolvent
There is reason to believe that it will be to the advantage of creditors
When you are rehabilitated it means that you are no longer insolvent and can be allowed to trade on normal terms. Rehabilitation enables the insolvent to make a fresh start, free from his pre-sequestration debts and from the restrictions placed on him by the Sequestration. Rehabilitation may take place automatically after 10 years from date of Sequestration or by application to the Court who granted the Sequestration Order. The Rehabilitation process takes approximately 8 – 10 weeks, provided all requirements have been complied with. The Hahn & Hahn way is to assist you by preparing an application to the High Court and to restore your creditworthiness.
1.3 Administration order
An Administration Order is a listing that results from your indebtedness to various creditors of not more than R50 000. These creditors apply to courts of law to have the debt paid through an Administrator.
If you are (A) not in the position to pay all your debts; (B) these debts are not more than R 50 000.00; and (C) 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.
An Administration Order will remain against your credit report for 10 years unless you settle the outstanding debts and costs and approach Hahn & Hahn Attorneys to assist with the rescission and removal thereof.
1.4 Debt Review
Debt review is a type of mediation process for over-indebted consumers. A consumer can seek the assistance of a debt counselor or may be referred to a debt counselor by a court. The main purpose of debt counseling is to assess a debtor’s state of indebtedness, facilitate a monthly debt repayment plan with the credit providers and to make recommendations to credit providers and / or magistrate courts on behalf of over – indebted consumers
Debt counseling restructures installments to allow the debtor to pay his / her debt and meet their basic living expenses. Debts are paid monthly and a debt clearance certificate is provided and debtor removed from the credit bureaus once the debt is settled in full.
If you fall behind with your account payments and fail to respond to reminder letters, your creditor will send you a letter of demand. If you fail to respond to the letter of demand a summons will be served. You have 10 days to defend the summons, after which your creditor will apply to court for a Default Judgment without further notice to you. A judgment means that a court has ordered you to pay your debt.
Your creditor now has the legal right to collect this debt from you by:
► Sending a Sheriff with a writ of execution to attach and sell your possessions;
► Proceeding with a Section 65 hearing against you whereby the court conducts a full financial enquiry. The debtor is required to appear in court and be present throughout the hearing. Upon conclusion of the financial enquiry, or upon the offer and acceptance of payment in installments, the court my order that an Emoluments Attachment Order be presented to your employer, which requires your employer to deduct money from your salary and pay it over to your creditor.
A judgment will remain listed at the credit bureaus for 5 years but the debt is valid and enforceable for 30 years. Rescission of a judgment might still be necessary.
Should you have a valid reason for disputing a Judgment that was granted against you, the Hahn & Hahn way is to consult with you to determine the merits of your defense and to explain the requirements for rescinding a judgment without necessarily settling the judgment debt first. It is important to bear in mind that should there be a valid claim by your creditor for the payment of a debt, albeit wrongly recorded in the Judgment, such a rescission will not absolve you in toto from your obligation towards your creditor, but will merely grant a respite from the pressure of a negative credit profile listing.
3. Adverse (Default) listing
Adverse listings are recorded at a credit bureau if you opened an account and failed to make the required monthly payments. Your credit provider will contact a credit bureau directly requesting the adverse to be listed against your credit report.
If the default relates to an enforcement action, such as the collection being handed over for recovery, legal action being taken or the debt being written off, the default remains on your credit report for two years. If the default relates to a subjective classification of your behavior, such as delinquency, slow paying, absconding or not being contactable, the default remains on your credit report for 12 months.
Adverse listings can in most circumstance be updated to a “Paid in full” status upon instruction of your creditor. Adverse listings can only be removed in limited circumstances and after a full investigation by the Credit Bureaus themselves. It is important to at least have the listing amended to reflect that the account was paid in full.
4. Trace Alert
A Trace Alert is recorded on your credit profile when a creditor requests a credit bureau to notify them of any updated contact information which is loaded onto your credit profile as they have been unable to contact you due to outdated contact information.
5. Payment Profile
Payment Profile is a summary of your monthly account payments. The most important way of improving your credit profile is to pay your accounts on time. Each month your payments are recorded in the Payment Profile section of your credit profile and provided you have been paying your accounts on time for at least six months, or preferably a year, you stand a far better chance of being granted credit.
6. Collection information
Collection Information relates to accounts that have been handed over to a collection agency. We at Hahn & Hahn Attorneys can contact the collection agency to obtain the outstanding balance and make comfortable payback arrangements on your behalf. Once the debt is settled we will ensure that the Collection Information is removed from your credit profile.
Data retention periods for the various types of listings
► Adverse (Default) listings: 2 years
► Judgments: 5 years
► Sequestration: 10 years
► Rehabilitations: 5 years
► Administration orders: 10 years
►Debt Review: Until discharged
How do I avoid being blacklisted?
► Pay all your accounts monthly before the due date as arranged with your creditors when opening the account
► Notify all your creditors of a change of address.
► Attend to legal documents and letters immediately.
► Should you be unable to pay your debt, contact your creditor immediately to make suitable arrangements and keep to these arrangements. Where possible have your creditor confirm the new arrangements in writing and keep the correspondence for possible future reference.
► Be careful of what you sign. Peruse documents first and contact us for assistance should you require advice