You don’t take calls from unknown numbers because it might be the bank or an angry creditor. Your credit cards are always maxed out and your salary never makes it to the end of the month. If this sounds familiar then you are more than likely over-indebted, which means that your expenses exceed your income. Here is some advice on how you can pull yourself out of the red and get your finances back on track.

How do you know if you are over-indebted?

Watch out for the following red flags, all of which could indicate that you are in over your head!


  • You borrow money to pay other debts.
  • You use your credit card and/or overdraft to buy food and other necessities.
  • You skip payments on some accounts in order to pay other accounts.
  • You receive letters of demand from lawyers and credit providers.
  • You have judgments against you.

Dealing with debt: the DIY route

Follow these steps to banish your debt:

  • First, contact your creditors to explain your situation and make alternative payment arrangements. You can ask for a payment holiday or negotiate reduced repayments over a six-month period while you get back on your feet.
  • Work out what your budget is. Start by making a note of every cent you spend. You will be surprised by how much that sandwich from the deli around the corner three times a week adds up to on a monthly basis.
  • Start shaving off the expenses you can do without, such as your favourite magazines, or consider suspending your satellite television subscription for a few months.
  • Prioritise the debt with the highest interest. These are usually your store cards and credit cards. The quicker you can pay them off, the better.
  • As you pay off one creditor, channel the money towards the next one until all your debt is paid off. For example, if you have paid off the balance on your Woolworths store card, then add that repayment towards your next highest debt such as your credit card.

The debt counselling route

Debt counselling is the last resort if you cannot see a way out of your financial trouble. A debt counsellor will decide if you are over-indebted and will arrange a revised repayment arrangement with your creditors that allows you enough money for essential expenses such as rent and groceries. The debt counsellor must notify all your creditors within five days of your application that you are undergoing debt counselling. If all your creditors do not agree to the revised repayment agreement, then the debt counsellor has to present the matter to a magistrate who will make the final decision. Note that you will have to pay debt counselling fees.

When you enter the debt counselling process you will not be allowed to access any further credit, including vehicle finance and home loans. You will first require a debt clearance certificate from your debt counsellor stating that you have repaid all your debt before a creditor can advance you further credit.

Watch out for the next instalment in our debt counselling series, where we tell you how to find a good debt counsellor and break down the debt counselling fee structure.