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This is how debt collection works (Full process explained)

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Young man sitting frustrated in his living room about to go through debt collection

No one wants another person to take their money or their belongings.

Miss enough debt repayments, then this becomes a reality.

It starts with the debt collection process, and if things go wrong, ends with someone repossessing your assets or deducting money from your salary or wages.

Here’s how the debt collection process works and what you need to know to protect yourself, your assets, and your money.

Let’s get started.


Debt collection

Debt collection is a legal process that businesses, individuals, or agencies use to recover and collect unpaid or outstanding debt from consumers or parties that owe them money.

Simply put: debt collection is the process that people use to get the money that is owed to them from people that don’t pay.

It’s governed by several regulations, including the National Credit Act (NCA), the Debt Collectors Act, and the Prescription Act.

  • The NCA sets rules for debt recovery and counselling.
  • The Debt Collectors Act regulates the profession and its fees.
  • The Prescription Act defines time limits for debt recovery.


It’s a rough process that neither side wants to participate in. Luckily, these regulations keep things in check and help ‘smoothen’ the debt collection process.

We’ll refer to both parties (or sides of the process) throughout this post:

  • Creditor = the person or business to whom money is owed.
  • Debtor = the person or business that owes money.


So, how does the debt collection process work?

Let’s find out.


Debt collection process

When a person has outstanding debt, keeps missing payments, and is getting further and further behind…that’s when debt collectors emerge.

Debt collection is a painful process and one that 99.9% of people want to avoid.

Anyone that is struggling to keep up with their debt should start taking steps to avoid debt collection and repossessions. We recommend applying for debt counselling or debt review (more on that later).

Let’s break down the debt collection process into its key steps.


Debt collection process steps

  1. Internal collections
  2. Default notification
  3. External debt collection
  4. Legal action
  5. Execution of judgement


A graphic that lists the steps in the debt collection process in South Africa


Internal collections

The creditor (business or individual to whom money is owed) first attempts to collect the debt themselves. This is known as internal collections.

Generally, it’ll involve sending reminders, emails, and phone calls to get the debtor to pay up.

Until enough is enough, then things start to escalate.


Default notification

If the debtor doesn’t pay on time, then the creditor must send a letter of demand or Section 129 notice.

This is part of the legal process and is a requirement according to the National Credit Act (one of the regulations we mentioned earlier).

The letter of demand informs the debtor of their default and proposes ways to resolve the debt.

What is a section 129 letter of demand?

A section 129 letter of demand is a legal notice sent by a creditor to inform a debtor who is in default of their debt situation and propose various options to resolve their outstanding debt.


What is a section 129 letter of demand explained


Now, what happens when the debtor still doesn’t pay?


External debt collection

Next, creditors usually turn to professional debt collectors. External debt collectors or debt collection agencies start by following similar steps, such as sending emails and contacting the debtor (known as a soft collection).

If the debtor doesn’t pay up, then creditors and debt collectors will take legal action.


Legal action

If the debt remains unpaid after internal and external collection and the distribution of a Section 129 letter, then creditors are allowed to take legal action.

This might be the part that you’re most interested in, so we’ll go a little deeper.

(Legal action and litigation are sometimes referred to as hard collection)

Legal action under debt collection usually involves:

  • Summons
  • Court appearance
  • Default judgement
  • Judgment


Here’s what that means:

The creditor files a lawsuit in court, and the debtor gets served a summons which tells them about the lawsuit’s details (that’s bullet 1: summons).

The debtor can respond by:

  1. A) Paying the debt in full before a judgement is made. Typically, this will halt the legal proceedings.
  2. B) Disputing the debt. To do this, they must file a Notice of Intention to Defend, which will lead to a trial that requires a court appearance (bullet 2: court appearance); or
  3. C) Ignoring the judgement (whether on purpose or by accident — please don’t do this), which will lead to a default judgement issued by the court in favour of the creditor (bullet 3: default judgement).


Struggling to keep up with your debt?

Our team can help make your debt affordable once again.

We help thousands of South Africans to reduce their monthly debt repayments, protect them from legal action, and keep their assets — our team can help you too.


A default judgement is essentially a default court ruling in favour of the creditor. In sport, this could be compared to when one team doesn’t show up to compete and the other team wins the match by default.

The judgement legally confirms the debt and allows the creditor to take steps to recover it, such as repossession, seizing assets or garnishing wages (bullet 4: judgement).


Execution of judgement

Now, the court order (judgement) gets enforced. By this point, the debtor is in serious trouble.

If the debtor still fails to pay after receiving a court judgement that validates the debt, then the creditor may take steps to collect the debt (whether directly or indirectly).

The creditor may apply for a Warrant of Execution ( a document that authorises repossession of the debtor’s assets), a garnishee order or an Emoluments Attachment Order (EAO) order (various court orders that require the debtor’s employer to deduct a portion of their salary to repay the debt) may be issued.


A graphic that explains what happens when debt collection is enforced


Preventing debt collection with debt counselling (debt review)

Anyone that finds themselves in hot water (behind on payments) could turn to debt counselling before debt collection becomes a serious problem.

When an individual applies for debt counselling and gets approved for debt review, a debt counsellor helps to protect them (the debtor) from legal action and creditors.

Debt counsellors negotiate lower monthly debt repayment terms that creditors must agree to. This way, debtors can afford to repay their debt and creditors get paid. It’s a win-win.

Check out our post on how debt review (debt counselling) works to learn more.


Final thoughts

So what did we learn?

Debt collection and repossession can and should be avoided. Here’s how:

  1. Pay your debt on time to avoid debt collection altogether.
  2. If you’re struggling to keep up with debt repayments, contact a debt counsellor to apply for debt review before it is too late.


Protect yourself, your money, and your assets.

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