What happens when you go into debt review?
What happens when you go into debt review?

What happens when you go into debt review?

A debt counsellor restructures your debt into affordable instalments with reduced interest rates, which you pay to a payment distribution agent who then pays your creditors. Debt review offers immediate financial relief and helps you avoid repossession. When it comes to paying your debts every month, do you ever feel that you are at your limit when it comes to being able to make payments? Are you finding it difficult to get out from under your debts due to the constant bombardment of account statements and high outstanding balances you receive each month? You are not alone. South Africans are accumulating debt at an alarming rate, and debt review applications are increasing. 

According to VeriCred Credit bureau statistics, consumers owe more than R2 trillion in debt to credit providers at the end of June 2022. As these latest figures show, the level of debt that South African consumers are facing nowadays is staggering. Overindebted consumers can apply for debt counselling to help them repay their debts. Although debt counselling has received some negative press over the last few years, consumers are becoming more aware of its advantages.

There has been an increase in the number of consumers seeking debt counselling assistance in recent months, which shows consumers understand how beneficial the debt counselling process can be for them. If you have no choice but to seek debt help, what happens when you go into debt counselling? Here is an in-depth look at the debt relief process from a consumer's perspective.

How do you know when it is time to seek a debt review?

It is common for people to wonder what constitutes a breaking point when dealing with managing their debt repayments. The question is, how do you know when you have hit rock bottom? Once or twice missing payments on your account repayments might not be a big deal. It is no secret that now and then, like during the festive season, we have periods of bad months where we do not even consider spending money according to or within a predetermined budget.

However, if you fall consistently behind on your account payments like credit cards, car, or home loan payments, you will find yourself in a dangerous debt situation soon. We suggest you need immediate assistance addressing your debts through debt counselling. 

A person who uses credit cards to pay the instalment of other credit card debt or other credit agreements is a tell-tale warning sign you are heading for dangerous territory. Debt counsellors will tell you using one credit card to pay the instalment of another credit agreement is a never-ending game that is unlikely to succeed. In general, this is not a good idea if you do something like this because it will result in excessively inflated balances on your credit card over time.

Debt Review Form 16

Step 1: Application for debt review process - Form 16

The first step in the debt review process is the form sixteen application form. 

Process and Consequences of this application

  1. Upon receiving your form sixteen application, your debt counsellor will notify all your credit providers and inform all the registered credit bureaus that you have submitted a request to apply for the process.
  2. You will temporarily have your name listed with all registered credit bureaus as having applied for debt counselling.
  3. The application form must contain a list of all the credit providers you owe money to and a copy of all requested documents. Among the documentation you will need to provide includes pay slips, bank statements, and a copy of your ID card. 
  4. Your application will not be accepted if any documents are not submitted within the first ten days of receipt by the Debt Counsellor. Upon rejection of your application, the indicator will no longer appear on your bureau report.
NCR Regulated Debt review Costs involved for this application: R350
Debt review removal. 

Please Note. If you change your mind about the process at any point during this application process, you will still have the option of cancelling it and getting the credit bureau indicator removed from your credit report. It is imperative that you do not make any hasty decisions and speak with your debt counsellor openly about anything you are uncomfortable with before cancelling. A cancellation without consideration could have significant financial repercussions in the future.


Step 2: Notifying creditors of your debt review application via Form17.1 

Upon receiving your form sixteen application, your debt counsellor will contact all your credit providers and credit bureaus to inform them that you have applied for the process. Credit providers will receive form 17.1 from debt counsellors. Credit providers will only accept form 17.1 when providing information about your account. 

This form 17.1 does not indicate that you are overindebted. Instead, it is an official notification to credit providers that they must send information about your credit agreement within five days to the Debt Counselor for assessment. 

Credit providers will provide debt counsellors with the following information in response to form 17.1:

  • Name of Account
  • Account number
  • Balance outstanding
  • Monthly instalment
  • Interest rate
  • Additional monthly charges like account fees
  • Linked Insurance
  • Indicate if the account is a legal account or not. 
NCR Regulated Debt review Costs applicable for this form 17.1 process: 

No additional fees apply since it still forms part of the application fee.

Debt review removal. 

Please Note. If you change your mind about the process at any point during this form 17.1 process, you will still have the option of cancelling it and getting the bureau indicator removed from your credit report. Before you cancel, speak openly with your debt counsellor about anything that is uncomfortable for you. Do not make any hasty decisions. There could be significant financial repercussions if a cancellation took place without consideration.

Debt review Form 17.2

Over-indebtedness assessment - Form 17.2

It has now been 5 days since you applied for debt counselling, and your debt counsellor has informed all the credit providers of your debt counselling application, as discussed above, via form 17.1. Your debt counsellor will now start to receive a certificate of balance for each of your accounts. Upon receiving all certificates of balance, the debt counsellor will be able to determine whether you are over-indebted or not. 

Form 17.2? What is its purpose?

A Debt Counselor will use Form 17.2 accepted or rejected to inform all the various credit providers that a consumer has now been accepted or rejected for debt counselling and restructuring through the courts. 

Form 17.2 accepted

The form 17.2 accepted will have the following information:

  • Name and Surname
  • ID number
  • Credit granting institution's contact details
  • Debt Counsellors NCR registration details.
  • A Notification paragraph according to NCA regulation 24 (10). 
    • This letter informs all credit providers that the restructuring application was approved, and you have been declared overindebted.
    • You are now officially in the process of restructuring your debt as the restructuring negotiation with creditors will start. 
    • There will be a ten-day negotiation process with creditors.
Debt review removal after the issuance of form 17.2

Please Note that after form 17.2 accepted is issued, you can cancel it and get the credit report indicator removed from your credit report by applying to a court to declare that you are no longer over-indebted. 

The courts will not grant you a court order stating that you are no longer over-indebted if you are still over-indebted. It is imperative to be open with your debt counsellor about anything that makes you feel uncomfortable before you stop paying the restructured instalment. It is common for consumers to stop paying their restructuring instalments expecting to get declared not overindebted, but this usually does not happen. Please do not make any hasty decisions, as a court's rejection of your application could have significant financial implications.

The form 17.2 rejected.

The form 17.2 rejected will have the same information as the form 17.2 accepted, specifically:

  • Name and Surname
  • ID number
  • Credit granting institution's contact details
  • Debt Counsellors NCR registration details.
    • A Notification paragraph according to NCA regulation 24 (10). This letter informs all credit providers that the application has been rejected, and the debt counsellor will not proceed with the restructuring process.

Consumers have the right to take their debt restructuring application straight to a magistrate's court and make a private application if they believe that their debt restructuring application was wrongly rejected.

Debt review removal after the issuance of form 17.2 rejection

Your debt counselling indicator will be removed automatically, and the NCR website will be updated with the rejection information. A copy of the form 17.2 rejection will be sent to all bureaus to ensure the debt counselling indicator is removed. 

Restructuring Proposal to creditors

We will provide you with a copy of the budget that we have agreed upon, detailing the instalment amount due to your credit providers and the list of credit providers included in your debt obligation list. Following that, we will communicate directly with the Creditors and send them the detailed and agreed-upon repayment proposal. 

Following the restructuring of your debt, you make the restructuring payment to our payment distribution agent, who will then distribute the funds among all your creditors under your payment plan. Once Credit Providers accept our recommendation, the restructuring proposal will move to the next step - obtaining a court order.  

There is a possibility that your creditors will issue a counter proposal if they do not accept the proposed repayment plan. As soon as we receive the counterproposal, we will discuss it with you and inquire as to whether you can afford it. If the counterproposal is not practical for your budget, we will inform you of the legal process which allows a magistrate to make the final decision.

Debt review removal after proposals were sent to your credit providers.

Please Note that after form 17.2 (accepted) is issued and a proposal is sent to your creditors, you can cancel it and get the credit report indicator removed from your credit report by applying to a court to declare that you are no longer over-indebted.

NCR Regulated Debt review Costs applicable for this form 17.2 proposal sent process: 

The restructuring fee is equal to the distributable amount of not more than R8000 for a single applicant and R9000 for consumers married in a community of property.

Debt review avoid repossession


Avoid Car and home repossessions.

As a result of affordability pressures, you might face vehicle repossession, and your vehicle or home loan finance arrears have significantly increased. This situation has resulted in you receiving a high volume of calls from credit providers and their debt collectors informing you that they will repossess your car.

As part of Form 17.2 and the proposal process, repossession of your account will stop. Those financing accounts will be restructured to include any arrears and repaid over a period acceptable to the lender. For more on the repossession process, please visit our article on car repossession.

NCR Regulated Debt review Costs applicable to stop repossessions.

As discussed above, this process of stopping repossessions is part of Form 17.2. Therefore, no additional fees are payable.


Reckless Lending investigation

The investigation of reckless lending is a critical component of debt counselling. Most loan sharks and payday loan providers are relaxed about doing proper financial assessments, though they may violate your rights. How can reckless lending be defined?

According to the National Credit Act 34 of 2005, before any credit agreement is entered into with a consumer, it is essential that the credit provider conducts a financial assessment on the consumer to establish whether the consumer will be able to meet the repayments of the new credit agreement. The following circumstances warrant reckless lending investigations: 

  • After assessing the consumer's financial situation, the credit provider may conclude that entering into the proposed credit agreement would result in over indebtedness for the client but proceed anyway. Such contracts are considered reckless lending.
  • A credit provider who fails to conduct a financial assessment before entering into a credit agreement with a consumer is reckless in lending or advancing the credit facility to the consumer. 
  • It constitutes reckless lending if the credit provider conducts a financial assessment and concludes that the consumer does not understand the obligations, costs, and risks associated with the contract but still enters into the agreement with the consumer.

An assessment of your financial situation by your debt counsellor will enable the counsellor to identify reckless lending agreements and make an application to the court for adjudication. 

The court has the power to set aside part or all your rights and obligations under the terms of the credit agreement if it finds the contract unfair or reckless. As a result, you no longer must pay the balance on the debt.

NCR Regulated Debt review Costs applicable to investigate reckless lending.

There is a cost of R1500 payable to cover the cost of applying to a court to declare your credit agreements to be reckless.


Court order process

The next step in the debt counselling process is the court order process where a Debt Counsellor prepares the Application for the court to consider. A debt counsellor signs the court application commissions the court affidavit and serves and files the application before the sixty-day deadline to ensure the consumer stays protected.

NCR Regulated Debt review Costs applicable to court orders.

There is a cost of between R1500 - R9000 payable to cover the cost of applying to obtain a court order. In terms of costs, it varies depending on the debt counselor and their agreement with their attorneys. Ask the debt counselor about the legal fees upfront. Do not use a debt counsellor who is charging exorbitant fees. 

Debt review removal. 

Please Note. As soon as a court order is in place to restructure your debts, you will only be able to remove the credit bureau indicator once all the restructured debts as per the court order have been settled in full. 


Debt review monthly payments

All the red tape is finally out of the way, and a court order is in place. The next step will be your monthly payments to creditors via a Payment Distribution Agency (PDA). According to the National Credit Act, a Payment Distribution Agency is a registered and closely monitored entity with the mandate to legally collect funds from consumers involved in the restructuring process and remit those funds to their creditors. It is imperative to keep in mind that debt counsellors cannot collect money directly from you. 

As part of the PDA system, users have access to a personal account where they can make accurate and convenient monthly payments under the court order and proposal. During the course of debt counselling, your debt counsellor will still play an essential part, even though your monthly debt payment goes to the PDA for distribution to your creditors. 

PDAs deal with distributing payments, not reviewing debts. As part of the program, your debt counsellor will conduct regular financial reviews, assist you in establishing and improving your money management habits, and guide you to a successful debt-free life. In addition to the above responsibilities, debt counsellors will review all your accounts to ensure the correct instalment is paid to each lender to deal with terminations. They will also deal with consumer balance queries, refund requests, debit order administrations and paid-up letter requests

NCR Regulated Debt review Costs applicable to after-care fees

You will be charged 5% of your restructuring fee up to a maximum of R450 per month.  

 Debt Review Clearance Certificate Form 19

Debt Review Clearance Certificate.

Your hard work and sacrifice have paid off, and your debt counselling process is nearing its end. Therefore, you will wonder what to do. Once you have paid your last instalment and the debt counsellor has received all the paid letters, the debt counsellor will issue you a clearance certificate as proof that you are now officially debt free. 

What is a debt review clearance certificate, and when is it issued? 

A debt counselling clearance certificate certifies that you have settled all your debt. You will receive a certified copy of your debt counselling clearance certificate when:

  • All your debts have been paid with paid-up letters. 
  • All your debts have been paid with paid-up letters except for your home. It is vital that you do not have any arrears on your bond to receive a debt counselling clearance certificate.
  • Finally, all your debt counselling and legal fees have been paid.

You don't need to do much during this last step. Your counsellor acts under Section 21 of the National Credit Amendment Act. Under this Act, your debt counsellor must submit a certified copy of the credit clearance certificate to all the credit bureaus. Your debt counsellor must also present all paid-up letters with your clearance certificate to all bureaus as required by the National Credit Regulator. 

Credit bureaus will update the rearranged accounts as paid and remove negative months in arrears indicators from payment profiles.

NCR Regulated Debt review Costs applicable to debt review clearance certificates.

If all restructuring and after care fees are current, there will be no additional fees required for the clearance certificate. 


FAQ from our clients

Debt review clearance certificate - how long does it take?

Your debt counsellor will issue a clearance certificate within seven days after you have completed the repayment plan and paid off all your debts. The debt counsellor will send this clearance certificate to all credit bureaus, and credit providers, and update the NCR website once you have completed the process. 

Can Debt Review be Cancelled?

If you wish to do this, then you can do so during certain stages of the process. You can cancel the process by following the instructions under each heading, which can be found under each heading in the article above. 

How long does debt review last?

An average consumer debt review application takes two to four years to complete depending on the amount of outstanding debt you have, reduced interest rate negotiations and the amount you can afford to pay each month. People often complete the process sooner than expected after a year or two due to changes in their personal financial circumstances. 

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