Your Account Is In Arrears? What Happens Next!

Missing one payment doesn’t feel like a big deal in the moment. Life gets busy, money runs short, and you tell yourself you will catch up next month. But the day you miss an instalment, or only pay part of it, your account officially goes into arrears, and a clock starts ticking that most people don’t know about until it’s already caught up with them.

What arrears actually means

When you took out that loan or credit card, you agreed to pay a set amount on a set date every month. The moment you miss that date, or pay less than the full instalment, you’re in arrears, and the effects are immediate and very real.

• Your credit score drops. A missed payment gets reported to the credit bureaus, often within days. This lowers your score and warns other lenders that you may be a risk.

• Late fees and higher interest. Many credit providers add penalty charges or push up your interest rate when you fall behind.

• The calls begin. Expect phone calls, messages, and letters from your creditor and their collection agents.

• A default listing. If the arrears drag on, a default can appear on your credit record, making future credit far harder to secure.

When things turn legal

If the arrears aren’t sorted out, the legal process moves into a formal stage.

• First comes a Section 129 notice under the National Credit Act, more commonly called a letter of demand. This sets out exactly what you owe, confirms you’re in default, and importantly, tells you about options available to you, including approaching a debt counsellor. It’s genuinely your last real chance to sort things out before things move to court.
• If you ignore this, the next step is that a summons will follow and be delivered by the sheriff of the court. This formal court document sets out the loan agreement and how you defaulted. You’ll have a set number of days to respond. Ignore this, and the credit provider can ask the court for default judgment against you.
• From there, if the debt still isn’t settled, a warrant of execution can be issued, which allows for movable or immovable property to be attached and sold to recover what’s owed by the sheriff. If there’s a shortfall after the sale, you still remain liable for the shortfall.

Once a judgment is granted, it goes on your credit record and stays there for a long time, making future credit very hard to get.

A smarter path forward

Here’s the part that gets lost in all the letters and phone calls: at almost every stage of this process, there are legal ways to change direction, and the earlier you act, the more options you have. If several of your accounts are slipping and you cannot keep up, debt counselling through debt review is often the strongest move you can make.

With debt review, a registered debt counsellor looks at your full situation, negotiates lower monthly instalments and reduced interest with your creditors, and restructures everything into one affordable payment. You also gain legal protection, so creditors cannot take further action against you while the process runs.

At Debt Freeze, the debt review process is built to guide you step by step, from a free assessment right through to your clearance certificate. You can see how the debt review process works on our Debt Freeze homepage, or learn more about debt counselling here.

Arrears are a warning, not a dead end. Take that one small step today, and you turn a stressful situation into a plan.