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How Debt Counsellors Can Help You Become Debt-Free

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Debt Review

How Debt Counsellors Can Help You Become Debt-Free

The Debt Counsellors Association of South Africa is a professional body to which debt counsellors belong. The counsellor members must adhere to the guidelines for the Code of Conduct, which ensures the integrity of the profession. The National Credit Act provides the legal guidelines to which counsellors must adhere and the process of debt review be followed.

What is debt review?

It is a process whereby the consumer is protected against the loss of assets to credit providers, as the result of over-indebtedness. Through this process, which is regulated by the National Credit Act and overseen by the National Credit Regulator, a counsellor reviews the over-indebt status of the consumer. If found over-indebted, the counsellor helps to restructure the consumer’s budget, in order to allow for enough income to pay the basic monthly expenses and to have enough money left to pay off the outstanding debts. This amount is lower than the amount that the consumer presently pays to the credit providers. The counsellor negotiates the restructured amounts with credit providers, and once an agreement is reached and/or finalised by the Magistrate’s Court, a debit order is placed on the consumer’s bank account for the specific amount.

Instead of having to pay each credit provider separately, the consumer now only pays one monthly amount, which is then distributed among the credit providers according to the negotiated agreement. This amount is also far below what the consumer originally had to pay monthly. Through this process, the consumer is protected against debt collection, asset loss and harassment from credit providers. Once part of the debt review process, the consumer no longer negotiates or deals directly with the credit providers. The qualified counsellor does the negotiation on behalf of the consumer.

How can Debt Review Help You?

If you find that you have to skip payments on some accounts in order to service other credit accounts, cannot make monthly payments on time, do not have enough income left to pay basic expenses, such as school, water & electricity and transport, or to buy food once you have paid your creditors, you may be over-indebted and can consider review as a way to lower your expenses and to still pay back creditors. Once you receive a letter demanding payment, you need to either make the payment as soon as possible or immediately contact a counsellor for assistance. Once judgment has been taken for a debt, the debt cannot be included in the review and you will not be protected against the loss of assets, in terms of the debt.

In many instances, creditors are willing to negotiate lower interest rates and since they know that they will receive monthly payments on time, they are often willing to negotiate review proposals with the counsellors. If the creditors are hostile, the Magistrate’s Court can still make a final decision on the agreement, which will help to protect you against creditors. However, you need to make the monthly payment and failure to do so will result in the lapsing of the agreement. This means that the credit providers can then withdraw from the process and demand payment of outstanding or arrear amounts.

Who Qualifies?

People that are over-indebted, earn monthly income, and are not under administration, can approach counsellors for debt review assistance.

Steps Involved

Our counsellors will provide you with the full details regarding the costs involved, as well as the steps to be taken. The basic steps are briefly outlined below.

  1. Initial Contact & Application – Contact the counsellor to discuss your debt situation. Should you wish to apply for debt review, supply a copy of your ID, payslips, latest account statements, information about the total debt for each, and a monthly income and expense budget.
  2. Assessment – The counsellor assesses your debt status and discusses any issues regarding such.
  3. Restructuring of the Budget – The counsellor restructures your budget to allow for repayment of debt, through a consolidated monthly instalment.  The counsellor provides you with information about the costs and the proposed repayment plan. Should you wish to continue with the review process, the counsellor contacts the credit providers and credit bureau to inform them that you have applied for debt review.
  4. Negotiation – The credit providers agree to the proposed negotiated amounts and the Magistrate’s Court enforces the agreement, through the Consent Order. Should some of the credit providers not accept the proposal, the counsellor will approach the Magistrate’s Court for a final decision.
  5. Repayment Plan – You receive the repayment plan and the debit order is placed on your account for the monthly instalment.
  6. Debt Clearance Certificate – Once the debt has been cleared, you will receive a debt clearance certificate and can then enter into credit agreements.

Take the first step in becoming debt-free. Contact our counsellors for more information on the process.