A debt judgment is a court order that publicly records your debt. It has far-reaching and serious consequences as it can be executed immediately. This usually means your property, including your home, can be attached and auctioned if you are unable to pay the judgment debt.
A judgment will be noted on your credit report for five years or until the judgment debt is fully paid, and will impair your ability to obtain credit.
On top of losing valuable assets and your credit record being impaired, a credit provider might also serve a bill of costs on you in order to quantify the legal costs that they incurred in order to obtain judgment against you.
Before a debt judgment is taken against you, you must be issued with a section 129 notice notifying you that you are in arrears in terms of your credit agreement with a creditor.
You have ten business days from the date that the section 129 notice was delivered to rectify or address the matter. If you ignore the notice, your creditor is within its rights to hand over your debt to a debt collector or attorneys specialising in debt collection. Read more: Why should I not ignore a letter of demand?
Alternatively, your creditor can issue a summons indicating it is proceeding to court. The sheriff of the court will deliver the summons and you have 10 days to indicate if you plan to defend.
If you fail to defend the court case, the creditor can apply for a default judgment against you. If you defend the matter and lose, the court can also issue a judgment against you.
When you become a judgment debtor, the judgment debt is payable immediate.
The judgment creditor is entitled to “execute” on the judgment. One way in which they can do this is by attaching movable property if you are unable to pay the debt.
This process begins with the issuing of a warrant of execution followed by a visit from the sheriff of the court, who takes any movable property of value. This can be anything from vehicles, furniture and appliances, to works of art.
Certain things cannot be attached, including beds, bedding, necessary furniture, food and tools of your trade. Aside from these items, most movable goods are eligible for attachment.
Once your movable property has been attached, your creditor or their attorneys will request a sale date from the sheriff to arrange that your property be sold at an auction.
A debt judgment remains in place for 30 years or until you have paid it off. If you do not pay it off or get a court to rescind it, it can be collected at any time within those 30 years.
A creditor might also seek to execute on immovable property, like your home, holiday home or investment property.
In order to do this, the creditor has to bring an application to the High Court to ask it to declare such property executable. In other words, your creditor has to ask the court’s permission to sell your immovable property on auction.
Although South African courts don’t like to deprive people of their homes, they may do so if you are living large – in an expensive or bigger home than you need. If you could live in a more modest home, the courts might look favourably on such an application.
Another way that a credit provider seeks to execute on a judgment is to do a financial enquiry as to your income and expenditure.
Based on that information, the court can make an order to direct what amount you should pay on a monthly basis in order to settle your debt, and may obtain an emoluments attachment order (EAO) directing your employer to deduct the amount from any salary due to you and to pay your creditor directly.
If you are called for a financial enquiry and you fail to show up at court, the court may issue a warrant for your arrest, in which case the sheriff will arrest you and immediately take you to court for contempt of court.
If your debts exceed your assets (ie you are insolvent), a judgment creditor can apply for your estate to be sequestrated. If this is granted, the court will appoint a trustee to take control of your financial affairs and the trustee will sell your assets to settle as many of your debts as possible.
This is a drastic measure and is generally not followed for small debts, although some creditors might do it in order to expedite payment of the judgment.
The court will only declare you insolvent and grant a sequestration order if your assets will enable the creditors to get at least 20 percent of the debt due.
