In South Africa’s current economic climate, still reeling from the serious effects of the Covid-19 pandemic, retrenchment is an unfortunate reality for many.
And although the thought of getting retrenched while in the process of paying off your debt is a scary one, there is a way to stay on track. This article is going to break down what happens to your debt if you get retrenched and what you need to do if you find yourself in this situation.
What happens to your debt if you get retrenched?
When you get retrenched, your debt and debt repayments will remain due and payable as usual.
You will need to take action and notify your creditors immediately to see if any repayment terms can be negotiated. Oftentimes credit arrangements include clauses that occur if you are in a situation of finding new employment and a two-month ‘grace period’ is often the standard.
If you’re already under debt review, then you’ll need to contact your debt counsellor to notify them as well.
If you have credit life insurance, check if you have retrenchment cover. If you do, this will assist in covering your debt repayments for a certain period of time. Take note that unsecured loans (credit cards, student debt or personal loans) often come with credit life insurance.
If you are unable to make repayments, you are at risk of being issued a Section 129 Notice by your creditors and legal action may be taken in the near future.
We help thousands of South Africans reduce monthly debt costs, protect their assets, and stay out of court—find out what we can do for you.
What to do when you are retrenched
Revise your spending and adjust your budget
Having a specific monthly budget is essential to anybody wanting to remain financially secure, but in case you find yourself retrenched, review and adjust your budget as soon as possible.
Identify and allocate money to essential living expenses and cancel any unnecessary expenses (for example, your Netflix account, gym membership, etc.). Once you are earning a stable income again, you can re-register for these types of luxury expenses.
Side note: as difficult as it may be, sit down and discuss your financial situation with loved ones or other individuals who may be reliant on you to make certain payments such as roommates or partners.
Contact your credit providers ASAP
Aforementioned, contact your creditors as soon as possible to notify them about your financial situation
Keep the lines of communication open and explore the possibility of renegotiating repayment terms or implementing any clauses that exist in a situation of retrenchment.
Claim UIF
If UIF was deducted monthly from your salary, you are entitled to claim from the Unemployment Insurance Fund (UIF). Most times, you are eligible for financial assistance for up to twelve months or until you find a new job.
When claiming UIF, make sure to apply within six months of being retrenched. You will need the following documentation to provide the Department of Labour:
- Your ID
- Forms UI-2.8 and UI-19
- Proof of registration as a work-seeker in South Africa.
We help thousands of South Africans reduce monthly debt costs, protect their assets, and stay out of court—find out what we can do for you.
Map out your financial runway
Identify a date where your financial situation will become detrimental or dangerous. Do not let this date completely consume you but rather motivate you to get things in order as quickly as you can.
If you have a fair amount of time, then sometimes, it is best not to rush into the first opportunity that you find, and instead consider your options to make sure that you’re making the best long-term decision.
Also, tie up any loose ends with your former employer and with anybody who may owe you money. By mapping out a gameplan, it can help consolidate your thoughts and get you on track.
Seek new employment opportunities
Get ready to start looking for new employment by updating your CV, cover letter, LinkedIn profile and getting a list of professional references ready. Start looking for jobs online, in newspapers or other publications, on social media and talking with your friends, family and other connections. Dig deep and leverage your network, professional and interpersonal skills to look for or even create new opportunities that can create an income.
Here’s another very important note: stay calm. You may be feeling incredibly emotional and overwhelmed – take a deep breath and remember that a step forward is always a step in the right direction.
Final thoughts
It is important to remember that once you are retrenched, there is always a way forward! We hope this article was insightful and may assist you if you are currently retrenched or know somebody facing a similar situation.
If you’re struggling with debt, we could help reduce how much it costs every month and free up some of your income for other critical expenses. Try our online assessment at My Debt Hero to see if you qualify.
