As many as 10 Million South Africans, or 40 % of credit active population, find themselves burdened by unmanageable debt. Debt review was created by government to address this issue and help over indebted South Africans to gain financial freedom.
The debt review process
has many advantages, the most significant of which is that it allows consumers to repay their debt in a structured and manageable way. Your debt counsellor will assess your budget, consider essential expenditure such as groceries, housing, education and transport and then work out how much you can actually afford to pay. Your debt repayments are reduced into one manageable monthly instalment. While under debt review you will not be blacklisted or have your assets seized by your creditors, your assets are protected from legal action. Once you have paid off all your debt your credit record is cleared, and you can begin to live life debt free.
In this article we explore the various aspects of undergoing a debt review with National Debt Counsellors in South Africa, allowing you to make the best decision for your financial future.
What is debt review?
Debt review is a formal debt restructuring process with many advantages for any South Africans that are struggling to make ends meet at the end of each month.
Debt review was created under the National Credit Act 34 of 2005 (‘NCA’) and was governments answer to the problem of rising levels of consumer debt and the chronic over indebtedness that plagues many South Africans. Debt review was built with the consumer in mind, it is highly regulated and can only be conducted by a NCR qualified Debt Counsellor.
Debt review allows for a debt counsellor to renegotiate and restructure your debt to an amount you can afford. Your debt counsellor will negotiate with your creditors on your behalf and come up with a plan to pay off all your debt. Your only requirement is to continue to pay your reduced monthly instalment, once your plan is complete and your debt is paid off, your credit record is cleared and you can start to live debt free.
What happens when you go under debt review?
The first step is to get in contact with a qualified debt counsellor, National Debt Counsellors offers free assessments 6 days a week by one of the largest teams of debt counsellors in the country. Simple contact our national call centre on 087 727 9728 or send us a call back request via our website www.nationaldebtcounsellors.co.za or on WhatsApp (087 727 9728).
Following your assessment your debt counsellors will determine if you are over indebted, in other words if your monthly debt repayments are higher than you can reasonably afford.If this is the case they will send you a summary of your assessment which you can review, this is called a form 16. Included in this form is a summary of your current debt and your current monthly repayments, a proposed new budget that will make sure you can afford your essential living expenses and a proposed debt review plan showing your new reduced monthly payment. National Debt Counsellors tries to stay at the forefront of technology and has the ability to allow consumers to electronically sign their application on their smart phone.
Once you have approved the application then the real work begins.Upon receipt of your form 16, your debt counsellor will notify all your creditors that you have applied for debt review. This is done formally via a form 17.1. Once your creditors receive this notice they must stop contacting you directly and must contact your debt counsellor instead, they also can no longer proceed to initiate legal action against you.
They have 5 days in which to respond to your debt counsellor with a certificate of balance confirming all the details of your debt and its current outstanding balance.During this time your debt counsellor will also request supporting documentation from you, such as your ID, pay slip and proof of residence. These documents will allow your debt counsellor to confirm the details in your original assessment and formally declare you over indebted, form 17.2. We try to make this process as simple as possible for consumers, your debt counsellor will work with you to secure all this documentation and can accept it over multiple channels such as email or WhatsApp.
Following this your debt counsellor enters into negotiation with all of your creditors and tries to come to an agreement which makes sure that all of your creditors get paid fairly. They will propose a new repayment, request extension of the term and try to reduce the interest rate you are currently paying.
National Debt Counsellors has excellent relationships with all major credit providers giving us the ability to get the best deal for our clients.Once we have reached a deal with all your creditors we send the plan to our national network of attorneys who make the plan an order of the court. This cements the plan in place and provides you with continued legal protection going forward.You will continue to pay your one reduced monthly instalment until all your debt is paid off, as per the details of your plan. Once this is done your debt counsellor will issue you with a clearance certificate and notify the credit bureaus. This will clear your credit record and allow you to continue to get responsible credit in the future.
National Debt Counsellors has had thousands of clients successfully complete debt review and start to live a new life completely debt free.
Who can go under debt review?
Anyone can apply for debt review, in order to be accepted you will need to complete the following qualifying criteria.
Firstly, you must be a South African citizen between the ages of 18 and 65, and should therefore be able to produce a valid South African ID.
Secondly, you must be over-indebted. In other words, you should not be able to cover your essential living expenses and pay all your monthly debt repayments every month. If you are struggling to make ends meet at the end of each month there is a strong likelihood that you are over indebted and should contact a debt counsellor for an assessment.Finally, you must be employed and be able to make your repayments monthly. If you are currently unemployed and have no income on a monthly basis, unfortunately debt review is not right for you.
How do debt review payments work?
The debt review industry is highly regulated by the National Credit Regulator (‘NCR’), the fees that debt counsellors are allowed to charge, how monthly payments are collected and distributed, and the time frames for the processes are all contained in the National Credit Act or supporting guidelines from the NCR.National Debt Counsellors does not collect any money from your bank account directly. We only work through a licensed and accredited Payment Distribution Agency as per the terms of the NCA.
We have chosen to partner with the biggest and most reputable PDA in the industry, Hyphen PDA. On a monthly basis Hyphen will deduct only the agreed instalment from your account via a DebiCheck authenticated debit order. They will then distribute the funds directly to the creditors according the agreed plan that has gone through court.
We only charge the fees allowed under the NCA and you will see an upfront breakdown of all the fees charged by us and the PDA in your initial assessment.
DebiCheck debit orders allow you to easily control your monthly debit orders, you must approve each debit order before it can be deducted and you can terminate them at any time. Your debt counsellor will help you setup your DebiCheck debit order when you first start.
How do I complete a debt review?
Debt review can be completed in one of two ways.
Firstly by paying off all your debt. It is important to note that this applies to unsecured credit and vehicle finance only, you are not required to have paid off your home loan to come off debt review.
As your debts are repaid one by one, your debt counsellor will gather paid up letters from your creditors and share them with you. Once all your debts are finished, your debt counsellor will issue you with a clearance certificate and notify the credit bureaus. You are now debt free and your credit record is clear.
Secondly if you have a substantial change in circumstance and can now afford to start paying your debt again at the original contract terms you can be declared no longer over indebted by the courts. It should be pointed out that should you request this you will no longer pay your reduced monthly instalment, you will need to pay the amounts originally agreed with your creditors when you took out the loans, you will also not benefit from the reduce interest rates negotiated by your debt counsellor.
In addition, you will need to prove to the court that you have had a significant change in circumstance like a major promotion or that your partner has returned to work.
As a general rule we suggest that consumers rather follow the first option, you can always pay more towards your debt at any stage of the process and thus reduce the time you will remain under debt review. You will also continue to benefit from the improved terms negotiated for you by your debt counsellor. Settling your debt is always the best option.
WARNING:Be careful of anyone who tells you they can get you off debt review for a fee by transferring to a new debt counsellor. This is not legal practice, often these debt counsellors are not properly registered, and their actions are not in the best interest of the consumer.