The Surety’s right to reciprocal counter-performance
The creditor may be contractually bound to render a counter-performance to the principle debtor against performance by the debtor of the principle obligation.
On discharging the principle obligation, the surety becomes entitled to claim the reciprocal counter-performance, and to set it of against his or her claim against the principle debtor.
Discharge of the Surety
Any variation of the terms of a contract of surety has to be in writing.
A contract of surety may, however, be terminated orally, except if the contract requires cancellation to be writing.
There are various circumstances under which a surety may discharged and they will be discussed in the final issue on sureties which also will be the next issue.
The National Credit Act 34 of 2005
Adv Clark,
I have a quick question:
Let's suppose a consumer is under debt counselling. It has been established that he is indeed over-indebted and all has been arranged with his credit providers - he pays a reduced amount to each credit provider as they agreed to.
What will happen if the consumer comes up with X amount of money from somewhere? Let's call it an external source. The consumer wants to pay off some of his debt with this extra money.
My question is this: How will that extra money be distributed? Will it be evenly distributed as a percentage amongst the creditors, or can the consumer pick one of his creditors at random, with the eye on it to pay off a larger amount and thus pay off that specific creditor in a shorter period?
Please accept my sincere gratitude for your response on my questions and your willingness to help.
Liezl
Advocate Clark’s Comment
Yes Liezl it will have a percentage impact on the down payment of his or her obligations.
In the event where he as a certain amount of money available to contribute to his consolidated debt, as you mentioned, there are two ways of distribution:
· The one way being to pay off one specific debt. In such a case you will have to use the % calculations again to re-calculate the remaining debts in terms of what they should receive after such a payment was made. The amount payable as per court order remains the same and therefore each outstanding debt under such circumstances will be entitled to a monthly payment higher than previously.
· Or on the existing % calculations that gave rise to the debt restructuring court order you can divide such an amount among the debtors to same %’s initially calculated.
At the end of the day you will have to decide what course of action will be the best in terms of such a person paying of his debts faster. According to me it will depend on the size of the amount available.
Just for clarity I am reflecting the calculations herein again that must be utilized to address these circumstances:
You will find your answer through the middle of this calculation as reflected within your Debt Councillor’s guide:
Example:
Mr In-trouble has four credit agreements –
Credit Prov. Type of Acc. Outstanding Bal Monthly Pm Rate
Nedbank Bond 400,000 4,500 14.0%
Standard Credit Card 10,00 1,000 20.0%
RCS Loan Microlender 8,500 1,500 36.0%
Wesbank Vehicle 56,500 3,000 19.0%
He has R6 000 per month available, after PDA and debt counsellor costs, to pay
off his debt.
Calculate how much of the R6000 each credit provider must get:
• Add up the monthly payments: 4,500+1,000+1,500+3,000=10,000
• Divide the credit agreement’s payment by the total and multiply by 100
to get a percentage:
Nedbank 4,500 ÷ 10,000 X 100 = 45%
Standard 1,000 ÷ 10,000 X 100 = 10%
RCS 1,500 ÷ 10,000 X 100 = 15%
Wesbank 3,000 ÷ 10,000 X 100 = 30%
• Check that the percentages all add up to 100%:
45% + 10% + 15% + 30% = 100%.
If 100% is not reached then you have made a mistake!
• Multiply the available amount (R6 000) by the percentage for that credit
agreement:
Nedbank 6 000 X 45% = R2 700
Standard 6 000 X 10% = R 600
RCS 6 000 X 15% =R 900
Wesbank 6 000 X 30% = R1 800
• Add up the amounts calculated for each credit provider and check that
they add up to the amount he has available.
If it does not add up then you have made a mistake:
R2 700+R600+R900+R1 800 = R6000
• Now that the monthly payment has been established a repayment
plan must be tested. The determined payments must be applied to
the agreements until the agreements are paid off.
If one agreement is paid off then the money used for that agreement must be allocated to the remaining agreements proportionately in the same way that the
original available amount was allocated, but now using the remaining agreements to reach the total, using the recalculated payments.
Supposing the R900.00 instalment for RCS was sufficient to pay the outstanding balance + interest off over four months. From month five the money would have to be distributed by:
o Add up the monthly payments: 2,700 + 600 + 1,800 = R5,100
o Divide the credit agreement’s payment by the total and multiply by 100 to
get a percentage:
Nedbank 2,700 ÷ 5,100 X 100 = 53
Standard 600÷ 5,100 X 100 = 12
RCS is paid off
Wesbank 1,800 ÷ 5,100 X 100 = 35
• Check that the percentages all add up to 100%:
53% + 12% + 35% = 100%
If 100% is not reached then you have made a mistake!
• Multiply the available amount (R6 000) by the percentage for that credit
agreement to get the new instalments payable from month 5
Nedbank 6 000 X 53% = R3 176
Standard 6 000 X 12% = R 706
RCS is paid off
Wesbank 6 000 X 35% = R2 118
• Add up the amounts calculated for each credit provider and check that they
add up to the amount he has available.
If it does not then you have made a mistake.
R3 176 + R706 + R2 118 = R6,000
• If the agreements are solved within the specified time periods and calculations then this is the plan to submit.
Supposing that this is not the case then:
Credit provider Original rate
Nedbank 14.0%
Standard Bank Card 20.0%
RCS Personal Loan 36.0%
Wesbank 19.0%
Reduce the agreement with the highest rate to be equal to the
agreement with the second highest rate:
Credit provider Original rate New rate
Nedbank 14.0% 14%
Standard Bank Card 20.0% 20%
RCS Personal Loan 36.0% 20%
Wesbank 19.0% 19%
• Test to see if the plan works now. If it still does not work, reduce the
value to the next level:
• If it does not work then reduce the two agreements above to the
same as the next (third) highest interest rate and test.
Supposing that prime is 14%, prime + 3 is 14+3 = 17%, so we can only reduce
to that level for now:
Credit provider Original rate New rate
Nedbank 14% 14%
Standard Bank Card 20% 19%
RCS Personal Loan 20% 19%
Wesbank 19% 19%
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