What is debt review? Can you get loans while under debt review? If you want to understand the pros and cons of debt review and what happens after debt review, this detailed guide explains it all.
What is Debt Review
Debt review, also known as debt therapy or debt counselling, is a South African debt reduction program that helps over-indebted customers get out of debt. In 2007, the National Credit Act (NCA) initiated the mechanism to discourage customers from being blacklisted, and to deal with the implications of being blacklisted.
The method is suitable for income-stricken South Africans who struggle to reach ends. Specifically for those who slip deeper into debt and are unable to keep up with regular debt payments.
Debt review is safer and more effective than consolidation loans which often end up being short-term solutions or get consumers into further debt. You should contact a debt lawyer if you are over-indebted to assist you to navigate the legal process.
Due registration with the National Credit Regulator (NCR) is required for a Debt Counsellor.
Is Debt Review a good idea
Yes, debt review is a good idea. There are debt review pros and cons but in the long term debt review is available to assist individuals in repaying the consumers debt to its creditors in full and is not a means for creditors to enrich themselves and charge additional interest over the extended term, as this further indebt the consumer.
You may need debt review if you have maxed out your overdraft /credit cards, you’ve fallen behind on one or more payments and basically losing sleep stressing over money.
Some of the Debt Review benefits include an affordable monthly budget, debt restructuring, so you pay only one monthly debt repayment, take over all communication with credit providers, negotiate with credit providers for reduced payments and legal coverage.
How can I cancel or withdraw from Debt Review?
After applying for debt counselling a form 17.1(b) will be issued which protects you from any further legal action by your creditors. Credit providers must provide a certificate of balance within five business days and the debt counsellor then assesses whether you are over-indebted. To be over-indebted, the counsellor must find that you are unable to fulfil all of your current credit obligations.
Following the assessment, Form 17.2(b) will then be issued within 10 business days of receiving the balance certificate. This includes a repayment plan that could include your creditors’ interest rate concessions.
Although this agreement still requires court approval, as advised by the debt counsellor, the consumer can start the new repayment schedule. All credit offices are notified that you indeed are under debt review.
The next step is to apply to the Court of Magistrates, and the judge declares the consumer indebted. New amendments to the National Credit Act now also require the magistrate to lower the interest rate paid by the creditors even though in the original proposal of the debt counsellor to the creditors did not agree to this.
What happens after debt review
In order for the debt review notice to be removed from your credit reports, a court request must be made for the court to find that you are not over-indebted, even if there was no court order in place to review your debt.
If you fail to pay your new reduced amount to your credit providers negotiated by your debt counsellor, then the debt review plan will be terminated. What this means is that the original instalments and interest rates will then have to be paid again, plus additional penalty fees.
Your assets may be repossessed because the advantages of the debt review process no longer protect you. However, if you become financially stable while under debt review, you may start Repaying more than required as this will save you money.
Doing this while your debt review is still underway will still afford you the protection debt review offers. It is not permitted for both the consumer and a debt advisor to terminate debt review.
You may cancel your debt review by emailing [email protected], if you have not yet been declared over-indebted.
However, if you’ve been declared over-indebted, then you’ll need to appoint an attorney who will need to get a court statement order stating you’re no longer over-indebted.
If you have already issued a court order, you will also need to appoint an attorney to rescind the court order on the ground that you are no longer over-indebted.
What happens if a debt counsellor refuses to issue a clearance certificate?
The first avenue is where a consumer requests debt review and obtains an order from the Magistrates Court to this effect. The consumer should address the relevant facts to the National Consumer Tribunal, which can then instruct the debt counsellor to issue the clearance certificate.
The second avenue is where the debt counsellor declared a consumer over-indebted, but the court did not make such an order. The additional information relating to the financial condition of the client must be put before the Court of the Magistrate, and the Magistrate should then reasonably find that the consumer is not over-indebted.
It may be advisable to approach an attorney to assist you with your debt advisors representations and any further steps that may be required if the debt advisor continues to refuse this provision will however change upon proclamation of the National Credit Amendment Act (NCAA) under section 71(1) as follows: A Consumer whose debts have been re-arranged in terms of Part D of this Chapter must be issued with a Clearance Certificate by a Debt Counsellor within seven days after the Consumer has:
a. Satisfied all the obligations under every credit agreement that was subject to that debt re-arrangement order or agreement in accordance with that order or arrangement; or
- financial ability to satisfy the future obligations in terms of the re-arrangement order or agreement under
- a mortgage: An agreement which secures a credit agreement for the purchase or improvement of immovable property;
- any long term agreement as may be prescribed;
- That there are no arrears on the re-arrangement contemplated in subparagraph and,
- that all obligations under every credit agreement included in the re-arrangement order or agreement other than those contemplated in subparagraph (i), have been settled in full to issue the clearance certificate.