Debt review is a solution that is targeted at over indebted consumers who are struggling with their finances. The National Credit Act (NCA) introduced the debt rehabilitation program (debt review) to protect consumers from the damage that credit can do, especially as credit providers are so quick with handing out credit. This also gives consumers a second chance to get out of debt and the opportunity to not get blacklisted.

The debt review process also ensures that debt counsellors follow ethical guidelines when assisting clients with financial recovery.  The main purpose of debt review is to help consumers get out of debt (pay one affordable monthly instalment) and to prevent them from getting into more debt in the future. This is ensured by not allowing one to apply and receive further debt while under debt review.

As a consumer, you will need to provide your debt counsellor with your ID document and salary slip. The debt counsellor will then review the information and assess whether you are able to repay your debts on a monthly basis. It’s important to be completely transparent with your debt counsellor about all your expenses as this will help them to draw up a realistic income and expense statement to determine if you are able to repay your debts. This will be done through the process of renegotiating interest rates with credit providers and extending the debt repayment terms. We don’t extend the period if we reduce rates.

A new monthly budget and payment plan (proposal) will be drawn up that will provide some guidelines about managing your finances in order live according to your means. The debt review process ensures that the consumer only makes one debt repayment to a payment distribution agency who will then pay all the consumer’s credit providers. This reduces the stress of having to keep up to date and on top of multiple debt repayments.

When consumers are under debt review, they are legally protected by the National Credit Act (NCA) and creditors are no longer allowed to hassle them. If you are struggling to make monthly repayments and the credit providers are knocking at your door demanding their money, turning to debt review is a great option.

The Benefits of Debt Review

  • The consumer’s needs and financial security are top priority as the creditor still receives payments. Debt review looks at the interest of all parties involved as the consumer is being given the opportunity to pay back small affordable amounts that are not enveloped in interest rates while the creditor will be paid back the money, even if this takes a few years.
  • A single amount is paid over by the consumer each month. This amount is agreed to by the consumer and debt counsellor after a budget has been drawn up. The debt counsellor will take the consumer’s credit into account and negotiate with the credit providers to bring the monthly payment down to an affordable amount.
  • Debt review is a process that teaches consumers how to manage their finances correctly and responsibly so that they do not fall into another debt trap.
  • When a person is undergoing debt review, the chances of them becoming blacklisted is reduced to zero as per the passing of the National Credit Act. Being blacklisted means having a mark against your name and future credit providers will know that you were blacklisted for not making payments to creditors.

You may be wondering what is a debt review or what is the function of a Debt Counsellor? Well, here’s a brief explanation:

Recently a new Act was made into law called the National Credit Act (the NCA).

In the NCA (which talks all about credit and credit accounts) there is a section (Section 86) which deals with what to do if a consumer has too many debts, too many obligations and not enough money to pay for everything. This section specifically mentions something called debt counselling. Debt Counselling would be advice about your debt from a qualified debt counsellor. A Debt Counsellor would be registered with the National Credit regulator (who is an industry watch dog – of sorts.)

The NCR:

Their job is not to make the industry work (they regulate, not control) but rather to try stop naughty creditors (and recently some Debt Counsellors who do not play by the rules) from being too naughty.

They send a lot of sternly worded letters, visit and of course, keep stats about the industry.

They also register Creditors and Debt Counsellors who offer debt review services.

Debt Review:

A Debt Counsellor will, normally, meet with a troubled consumer and go through their financials with them. They like to get you to fill in a form called a Form 16 which sums up your debt situation. Most prefer to have you do this in advance.

(in some cases the consumer may not be able to go to the Debt Counsellor so they might work with one another via the internet, email or over the phone.)

The Debt Counsellor will want to get as much info from the consumer as possible about what debts they have etc. (so take your statements with you). Most Debt Counsellors will help give you advice for free (though by law they can charge you R50 for coming to visit them). They should (under the Consumer Protection Act) ask you to sign a contract which explains what they will and won’t do if you want to enter debt review. If they don’t feel free to ask for one. This is something different from the form 16 but some clever Debt counsellors are combining the two to save time.

So take that first step. Simply call us directly at 086 111 3749 or contact our supportive debt counsellors via our contact page. Dont have the time? Request a Free Call Back and one of our counsellors will contact you! Zero Debt is a certified Debt Counselling company.

A New Budget:

The Debt Counsellor will also help the consumer set a new budget for household expenses since this is often totally overlooked by consumers.

It is very important that consumers then stick closely to this suggested budget amount if they want their debt review to succeed.

The Debt Counsellor will then use computer programs and phone calls, Faxes and emails to the various Creditors to try make a deal with them that they are willing to accept.

They don’t have to like it but if they do that’s good.

If they like it they will send letters to the Debt Counsellor saying they are happy with the plan.

If not they will send letters saying they would rather have…something else.

Either way (and let’s be honest it is going to be hard to make everyone happy) the matter get turned into a court application.

This is done under section 55 of the Magistrates Court Act since the NCA doesn’t cover the court application in detail or how is should be done.

The application is then heard in the Magistrates Court near where the consumer lives.

It is good to note that after 60 days of the review the Creditors can approach another court to try get a judgement against the consumer for the debt. However if they do so the consumer is then allowed to defend that new legal action and ask that they go to the court where the debt review is happening and that the creditor pay costs for trying this new legal action.

One reason why a Creditor might try this (other than greed or being nasty) is if they genuinely feel that the debt review will not work or if the consumer is not sticking to the debt review proposals

(if they are not paying the right amount or not paying each and every month).

Many Creditors have tried to take action against consumers who have assets to try get permission to sell these assets on auction rather than let the consumer pay over time.

This is a short term solution that some banks feel is worth it (since they can then claim insurance against the loss and even if there is a shortfall on what the consumer owes the judgement lasts for 30 years so they can take their time in trying to get the balance of the bond or vehicle finance back from the consumer over time).

If the consumer does not fight against this legal action though they will probably lose their assets even though they are under debt review. One factor in this is making sure that Creditors have your latest address so they can send any legal documents to the right address. This then allows the consumer to defend the matter. Consumers can either go to court by themselves (cheaper but nerve wracking) or they can get legal representation (an attorney or advocate) which is more costly.

SO back to the Court where the debt review application was made:

The Magistrates Court then will rule on the proposal as made by the debt counsellor . The creditors are also welcome to come to court and object or ask for more money etc (normally they just delay matters or ask for more money but can’t say where the money should come from.) This will delay the court ruling. The Courts are very busy these days so this can be a long procedure. Some matters have taken up to 3 years in the past. The good news is that these matters are now going faster and faster as the courts become more familiar with the applications. If the Magistrate understands and likes the proposal they will make it an Order of the court. Normally this is when the consumer needs to be present to say they understand how serious the matter is and to commit to the process and sign the Order.

The Court Order:

Once a Court Order is granted as per the proposal then this is sent to all the creditors and the consumer must make payments as per the Order each month with no deviations.

This is very important. Any deviation could invalidate all the work that has come before.

Then as time goes by the consumer should get monthly reports of how their accounts are doing.

So take that first step. Simply call us directly at 086 111 3749 or contact our supportive debt counsellors via our contact page. Dont have the time? Request a Free Call Back and one of our counsellors will contact you! Zero Debt is a certified Debt Counselling company.

Though the month of January is only half way through, debt counselling firms are reporting increased numbers of applications for help with debt review in January 2013 compared to January 2012.

This is no wonder as country wide indebtedness levels have grown. Consumers have struggled to curb spending and have rather turned to loaning money to maintain their lifestyle choices. As the “average” South African takes on more debt they bring themselves closer to financial disaster. Investec economist Annabel Bishop reports that the “average” SA household now has 31,8% more unsecured debt than a year ago.

Neil Roets, CEO of the debt counselling firm Debt Rescue says that this January there had been more than double the number of deeply indebted individuals applying  for relief through the debt review process compared to last year.

The upside of increased applications (besides more work for Debt Counsellors) is that more consumers in debt review gives more power to Debt Counsellors as well as debt review consumers. Hopefully these increased applications will eventually reflect in better attitudes by creditors.

When a consumer joins debt review they normally sign a POA or Power of Attorney with their debt counsellor.

This enables the Debt Counsellor to do certain things on their behalf such as cancel a debit order.

Standard Bank now want to get a debt counsellor to either use the POA (shown below) or to have consumers cancel their debit orders themselves. This is often difficult because once the consumer enters debt review (and shows as such on the banks computers) some bank staff won’t deal directly with the consumer but require that the Debt Counsellor contact them. Then there are other staff who refuse to help the counsellor even though he has a power of attorney.

When applying for debt review be sure to talk to your debt counsellor about a Power of Attorney. Also discuss which accounts have debit orders against them.

So take that first step. Simply call us directly at 087 702 1738 or contact our supportive debt counsellors via our contact page. Dont have the time? Request a Free Call Back and one of our counsellors will contact you! Zero Debt is a certified Debt Counselling company.