What is Debt Counselling?
Debt counsellors will help you to deal with your debt. They will deal with your creditors and come to an agreement that allows you to cover your living expenses and apportion the remainder of your available funds to your creditors. Debt counsellors will conduct an independent inquiry into your financial circumstances and make recommendations to credit providers and the courts concerning restructuring your debt or even suspending ”reckless|” credit agreements. You may not actually be ‘over-indebted’, and qualify for ‘debt review’, in which case the debt counsellor will assist you to work out a better monthly budget which will enable you to repay your debts effectively.
What is Debt Review?
This is the process of being assessed and assisted by a debt counsellor. The process begins with your application and ends with the issuing of a clearance certificate once all your debts are settled. The duration of the process can vary, depending on how much debt you have to repay, or your failure to make the agreed-upon repayment.
What does it mean to be "over-indebted"?
While this is now a legal term, it basically means that anyone who, after deducting living expenses from his or her net salary, has less cash left over than the instalments on their total debt, may apply for counselling as they are probably “over-indebted”.
What are the pros and cons of debt counselling?
Sometimes people borrow more money than they can afford to pay back and then they find themselves in serious financial trouble.
Debt counselling can help, but there are pros and cons:
– When you are in debt counselling, creditors cannot take action against you
– There is no permanent record of having undergone debt counselling
– Your budget will meet your basic needs first before provision is made for debts
– You are not allowed to apply for more credit while undergoing debt counselling
– It does cost a little bit of money, but the fees are set by law
– Your debts might take longer to pay off as a result of paying smaller amounts each month
The process of debt reviewing/counselling
– When you apply for debt counselling, you will have to complete an application form which you submit, together with the required supporting documents, to the debt counsellor.
– Your debt counsellor will inform your creditors and the credit bureaux of your debt counselling application.
– Creditors are required to provide the debt counsellor with outstanding balances on all your accounts.
– This information will assist the debt counsellor to determine whether or not you are over-indebted or whether the creditors were reckless in granting you credit.
– The debt counsellor will conduct an affordability assessment, which will determine your affordability on debt repayments.
– If your debt counsellor determines that you are over-indebted, he or she must inform all your creditors and credit bureaux.
– If you are not over-indebted, the debt counsellor must reject your application and inform your creditors and the credit bureaux.
– No legal action may be taken against you in respect of debts that are under review, provided that the creditor/s have not already proceeded with legal action against you.
– Your debt counsellor will draw up a repayment plan to rearrange your debt obligations in line with what you can afford, and submit it to your creditors.
– The debt counsellor must refer the matter to a magistrate’s court with a recommendation, which he or she will seek to have made an order of court.
– Once all your debts have been paid up, the debt counsellor will issue a clearance certificate and will inform credit bureaux that you are no longer under debt counselling. Contact Eksteen Attorneys on 011 679 3505 for more information.
What you should know about going under debt review
The debt review process is a powerful tool for consumers that find themselves in financial distress, if applied by a capable and experienced debt counsellor, supported by knowledgeable attorneys and initiated by consumers who are committed to the process.
The consumer will approach the debt counsellor, who should be registered with the NCR. The debt counsellor will do a comprehensive assessment. After taking all the consumer’s income, expenses and other relevant factors into account, the debt counsellor will draft a proposal that matches the consumer’s level of affordability and engage with the credit providers to negotiate reduced instalments and interest rates.
Once the debt counsellor has taken control of the debt, the consumer enjoys protection under the National Credit Act 34 of 2005, and no steps can be taken by creditors. The matter is taken to court by the attorney and a court order is obtained to confirm the proposal made by the debt counsellor.
No money should ever be paid directly to a debt counsellor. All payments should be made to a registered payment distribution agency.
If the consumer complies with the order, the debts will be paid up according to the proposed plan, whereafter the debt counsellor will submit a clearance certificate to court and the credit bureaux. At this point, the consumer will be fully rehabilitated and his credit profile will be restored.
The consumer should consider the following:
– Is the debt counsellor registered? – www.ncr.org.za
– Is the attorney registered? – www.lsnp.org.za