Some of the frequently asked questions about debt management or review are briefly answered below, to help you make an informed decision regarding your financial situation.
What is debt management or review?
It is also called debt counselling and is a process whereby over-indebted consumers gain protection against loss of assets and further legal action from creditors. The over-indebted consumer enters debt review and iNDC Financial Wellness Centre submits a restructured payment plan to the creditors.
Once the re-arranged and negotiated repayment plan is accepted and the matter is set down in court, the debtor pays a consolidated monthly payment to the Payment Distribution Agency (PDA), who distributes the money to the creditors according to the payment plan. Instead of paying each creditor individually, the consumer thus only makes one payment. This payment is more affordable, as an extended period of repayment is negotiated and often also has lower interest rates. Through this process, the over-indebted consumer can afford to make the payments and will have enough money left for monthly living expenses.
How is debt management through review different from administration and sequestration?
Debt management in the form of review or counselling was introduced by the National Credit Act, specifically to help over-indebted consumers pay off their debts and still be able to afford living costs. It is not a payment holiday. You still pay your debt, just with a consolidated monthly payment, instead of paying all of the creditors separately.
The amount is negotiated by iNDC Financial Wellness Centre and the matter is set in court. You do not have to attend the court hearing. While under review and as long as you pay the lower amount monthly, your assets will be protected and creditors cannot take legal action against you. Once the debt is settled, a debt clearance certificate is issued and you can once again enter into credit agreements.
Administration is a legal process whereby the credit instalments are reduced. However, creditors only receive payment every three months and the payment period is much longer than under review. To undergo administration, your debt must be less than R50 000.
Likewise, sequestration is also a legal process whereby all your debt is written off. This means you can be debt free almost immediately, once the court confirms such, but is only a suitable option of debt management if your liabilities exceed your assets and you do not have enough available income to restructure your current credit agreements with a reasonable payment proposal to the creditors. The record of sequestration will be against your credit record for a long time.
If I wish to undergo review, how long will it take before I will have protection from my creditors?
You will have immediate protection once you enter review.
I do not want to be blacklisted, but need debt management help?
Although a flag is placed on your credit record at the credit bureaux, it is not blacklisting. Indeed, many consumers undergo review because they wish to avoid a situation where they can no longer make payments and get blacklisted. Once the review period is over and debt settled, the flag is removed and your record will be clean.
Can I still undergo review if I have already received a letter of demand?
Yes, you can still undergo review, but time is of the essence. Once a judgment has been taken, the specific debt must be excluded from the review process. We can still make arrangements on a letter of demand or warrant of execution, but have to start the process as early as possible.
For how long will the debt review stay on my records and how will it affect my ability to get credit?
The idea behind debt review is to help you repay your current debts and to protect you against legal action from creditors. As such, you will not be able to open any new store accounts or apply for credit during this period. Once the debt is settled, a debt clearance certificate is issued and your name is cleared.
If you are not under debt review and make late payments or miss payments, you will build an adverse credit record at the credit bureaux, which will stay there for two years. Any judgments taken against you will stay there for five years if such are Magistrate Court judgments, and ten years if the judgments have been issued by a High Court of the country.
Debt review thus helps you to restore your credit record by helping you to build a solid record, regarding on-time monthly payments and then ultimately clearance of the debt review flag against your name at the credit bureaux.