What is debt counselling and Debt Review and what is the process?
Debt Review is a process that's used to help over-indebted consumers pay off debt. Debt review is the consultation, negotiations, financial education, budgeting and the use of various tools to negotiate with credit providers. The goal of debt review is to assist struggling consumers reduce and pay off debt. Debt review got introduced and enforced in 2007 by the national credit act. The introduction of debt review to over-indebted consumers meant these consumers can now seek financial and bad debt relief. Over indebted consumers can, therefore, safeguard their assets without having the fear of repossession.
Debt Review gets performed by a registered debt counsellor through certain sections of the National Credit Act 34. The National Credit Regulator is the only governing body tasked with the registration of debt counsellors. Complaints about debt counsellors get investigated by the NCR at the National Credit Regulator. Ensure that you only use the services of a registered debt counsellor.
The easy process of Debt Counselling
Step 1: Consultation
The first step is the important consultation process where the debt counsellor will meet and discuss your personal circumstances and explain the debt Review process in detail. The consultation will be in person at the debt counselling offices, or via a telephonic consultation. Should you be comfortable with the Debt Review process, a formal application gets completed and the debt counsellor will discuss your budget. A debt counsellor is not permitted to force or coax you to go under debt counselling.
Step 2: Establish if you are Over-indebted
With your application, you will provide proof of income and bank statements. The debt counsellor will take your income and necessary living expenses into account, and determine what disposable income will be available to pay back the credit providers.
Necessary Living expenses examples are the following:
- Rental
- Electricity
- Transport costs
- Groceries
- School fees
The debt counsellor will approach your creditors and notify them of your debt review application. The Debt counsellor will request a certificate of balance. This COB will state the balance outstanding, interest rate and monthly instalment.
The debt counsellor will now be able to determine if you are over-indebted. This determination will show if you will qualify for a reduced repayment plan under debt review. If there is evidence that you are not over-indebted your application for debt counselling will get declined.
Step 3: Restructured Repayment Plan
Should your application for debt counselling be successful you will get declared over-indebted. The debt counsellor will now start the negotiating process by sending a proposal to your credit providers. In this proposal, the debt counsellor will recommend a reduced instalment, reduced interest rates and reduced fees.
The credit providers will have 10 days to respond and state in writing if they accept, counter or decline the proposal. During this process, you will receive constant updates.
Step 4: One reduced Instalment to all your credit providers gets paid to a PDA
Like debt consolidation, you will now only have to pay a single reduced instalment to our Payment Distribution Agency. Our registered PDA will distribute your reduced monthly instalment as per our proposal.
Step 5: Court order
The agreed reduced repayment plan gets made an order of the court and the court order gets sent to your credit providers. You will maintain your monthly instalment until finished. We will issue a clearance certificate once you have settled all your creditors.
Step 6: Credit Clearance Certificate
We will issue you with a debt counselling clearance certificate. This clearance certificate is also known as a form 19. We can only issue this clearance certificate once you have settled all your restructured debts under the debt counselling consent or rearrangement court order.
Your Clearance certificate gets sent to all your credit providers and all credit bureaus. This is to notify all interested parties that you have completed and settled all restructured debts. The credit bureaus will close all the accounts as per the clearance certificate and remove the debt counselling indicator.
While under debt counselling you will enjoy the protection of the NCA
You enjoy full protection once you use our user-friendly Debt Review program. This process will end all worries about debt. Read our other articles here OUR BLOG. Our blog deals with marriage and debt, depression and debt, and a whole number of other interesting and informative articles. Stop legal action, expensive legal fees and blacklisting today. Inquire today about our debt review process or download our form here