Are you struggling to make ends meet and simply cannot keep up with the repayment of your debts? Do you fear losing your house or vehicle because you are behind with payments? Are you tired of having to negotiate with credit providers to avoid the loss of assets? You are not the only one. Many South Africans are in the same position, but there is a viable solution.
Debt review is a debt management process which was initiated in 2007 as a means to help over-indebted individuals pay back their debts, without being blacklisted and without losing their assets in the process.
One of the biggest problems that over-indebted consumers face is that of the possible loss of assets. Creditor harassment through constant phone calls, debt collection threats, and then also blacklisting and judgments are among the other problems experienced. Consumers find that creditors want definite dates for repayment of debts and are often unreasonable in their deadlines, but debt review allows for the protection of the consumer’s assets while repaying the owing money.
How does it work?
As mentioned earlier, it is a debt management solution and not a payment holiday. You can voluntarily enter the programme and once you are under review, creditors cannot initiate any further legal action against you. They indeed, cannot even call you to demand payment, since all communication with the credit providers will take place through the debt counsellor.
The counsellor reviews your debt status, monthly income and expenses, and the total amount outstanding. If the counsellor finds that you are over-indebted, the counsellor will notify the creditors and the credit bureau that you have applied for review, and will restructure your budget to allow for a lower consolidated monthly instalment to pay off all of the debt under review. This will also leave you with enough cash to pay your basic monthly expenses such as rent, telephone costs, school fees, groceries and transport.
The counsellor negotiates a new, and often lower interest, longer period for repayment and sometimes a reduced amount with the credit providers. Should a credit provider not accept the proposal, the counsellor will request the Magistrate’s Court to make a decision regarding the amount payable. Once the court orders consent, a debit order is placed on your account. A payment distribution agency redistributes the relevant amounts to the various credit providers and you receive a monthly statement regarding payments made and the total outstanding. The counsellors also provide after-care services and once you have paid off your debt, issue a debt clearance certificate.
While under review, you cannot enter into any new credit agreements, but once the debt is paid off and the notice removed, you can purchase on credit.
Types of Debt
Service contracts such as telecommunication, internet and utilities are excluded from review. School fees, vehicle lease and finance, where a residual is applicable, are also excluded. This means that you can still rent a house, but cannot purchase anything on credit. Although it certainly is a disadvantage, if you cannot enter into credit agreements, it protects you and credit providers against further debt. Debts that are included are that of credit cards, store accounts, personal loans, mortgages and vehicle finance. Through this process, your assets, including your home and vehicle, are protected. Note that all debts, except for the service contracts, must be included. However, if judgement has been taken against you for a particular debt, the debt cannot be included in the review process. You can still enter the debt management programme, if you have received a letter of demand for payment, but must do so as soon as possible.
The initial application fee is exceptionally low and the counsellors will explain all costs before proceeding with the review process. There are thus no unpleasant cost surprises and since the National Credit Act regulates the fees for the counsellors and legal team, you can be assured that you will not have to pay exuberant fees. Fees include the initial application fee, a rejection fee, where applicable, debt restructuring fee, after-care monthly fee, the legal fee and a fee for withdrawal from the review process.
Contact us for immediate professional assistance, if you are struggling with debt management.