Debt review is a process that protects consumers against onslaughts from credit providers. The National Credit Act was introduced in 2007 and has come a long way since. Thousands of people have already been helped to repay their debt and still have enough money left at the end of the month to cover their living expenses. This eliminates the stress of credit providers contacting them for payments.
Debt review is governed by a few main sections and regulations of the National Credit Act, as well as guidelines issued by the National Credit Regulator from time to time. Debt review in South Africa is the only debt review process internationally in terms of which home loans can be included in the debt review application. The benefits are therefore vast and consumers should make use of the process, as it is there to protect and assist financially strained consumers.
How does it work?
Debt review is, in essence, a legal process providing the consumer with all the legal protection he or she needs, ensuring the sustainability of the process, and at the same time provides credit providers with a collection method that does not alienate consumers, but provides them with a solution. The debt counsellor negotiates on behalf of the consumer with all their credit providers to determine the right amount to be paid back to these providers, which is not only affordable to the consumer, but also fair towards the credit providers.
During the negotiation process, the debt counsellor will reduce the monthly payments towards the credit providers to a more affordable repayment amount by extending the repayment terms. This ensures that the consumer has sufficient funds remaining to cover his living expenses, such as rent, transport, utilities, food, school fees, and so on, which provides the consumer with the financial relief he or she seeks.
The final step is for the debt counsellor to formalise the rearrangements by obtaining an order to restructure the debt in line with the proposed offer amount.
A copy of the order must be served on the credit providers, who must restructure the debt in line with the granted court order.
What protection do I get from my creditors?
In the first 60 days after applying for debt review, the credit provider may not take legal action against the consumer and the consumer is fully protected by the process. In practice, the debt counsellor will apply for a court date as soon as possible to ensure that the consumer is protected while the court application is pending, regardless of the time frame, in order to obtain a court order. Once under formal debt review, creditors may not take legal action as long as the debt review payments are made.
The good news for consumers is that, although the National Credit Act only applies to credit agreements, most service providers accept the debt review process and might allow for those accounts to be included in the process.
In the event that they do not accept the process, provision will be made in the consumer’s expenses to accommodate these payments.
What if legal action has already been taken?
Once legal action has been taken, it becomes almost impossible for that specific account to be included in debt review. It is important that consumers seek help from a debt counsellor as soon as they realise that they are facing financial distress to prevent credit providers from pursuing legal action.
When should I consider debt review?
Any consumer who finds herself in a position where she can no longer afford her debt as well as her essential living expenses should contact a debt counsellor as soon as possible. This should be done sooner rather than later.
Before a credit provider can implement legal action against a consumer in terms of a credit agreement, the credit provider must inform the consumer of her rights to contact a debt counsellor in terms of section 129 of the National Credit Act. From the date of receipt of this notification, a consumer will have 10 business days within which she would be allowed to contact a debt counsellor before legal action can continue on this specific account.
Debt review has helped thousands of people in South Africa to pay of their debt in an affordable manner without losing their assets, and it has proven to be a successful process. People should make use of this process whenever they find themselves in a position where they cannot afford to pay their monthly expenses.
It is important to note, however, that once under debt review, a consumer may not access any further credit until they have exited debt review.
How can I exit debt review?
A consumer can only exit debt review and be furnished with a clearance once all the unsecured debt has been paid up and home loan payments are up to date. Alternatively, a consumer can apply to the court if her finances have improved significantly and she can continue with the debt repayment levels before debt review was instigated. If a consumer stops making payments under debt review, the creditors can immediately bring legal action on all outstanding debt.
A project in Partnership with Debt Rescue.
Information provided by Debt Rescue.
Phone 0861 123 644 or visit debtrescue.co.za