It’s easier getting into debt than out of it. If you’re struggling to make your payments, it doesn’t help to ignore the problem – that only makes it worse because interest and other charges keep adding up. Ask for help from your credit provider by discussing the possibility of a new payment plan. Your other alternatives include voluntary surrender, which is when you give the asset back and the credit provider sells it so you only pay what’s left of your debt.
Debt review might be an option if you’re constantly in arrears and you aren’t able to make your payments. This process will help you with a payment plan that you can afford and that your creditors accept, plus it protects you from legal action.
This is how the process works:
1. Find a registered debt counsellor
You can look on the National Credit Regulator’s website for someone trustworthy – ncr.co.za. Be careful of searching for a debt counsellor on the internet or responding to adverts. There are many fraudsters who pose as debt counsellors but simply disappear with your money.
2. Take your documents
You will need to provide your debt counsellor with your payslip, ID, monthly expenses and the details of all your debt. The debt counsellor will also need copies of your bank statements, credit card statements and statements of all debt and assets, etc. If you are married in community of property, or you share assets and debts with your spouse, you will need to apply jointly for debt review.
3. The debt counsellor will determine if you’re over-indebted
You need to be completely honest about your debts – it doesn’t help to try hiding anything. If the debt counsellor finds that you are over-indebted (i.e. you are unable to make your monthly payments due to your financial situation) you may qualify for debt review.
If the debt counsellor finds that you aren’t over-indebted then your debt review application will be rejected and you’ll need to pay a rejection fee.
4. Your debt counsellor negotiates with your creditors
The debt counsellor assesses your financial situation and negotiates with your credit providers to restructure your debt to make your payments more affordable. Your creditors are under no obligation to agree to your debt review, or the restructured payment plan offered by your debt counsellor. But, most creditors will try and negotiate a restructured amount that will benefit you both.
5. You start debt review
While you’re under debt review it will show on your credit record and you won’t be allowed any more credit.
You’ll need to make a single payment to your payment distribution agency each month and they distribute the amount among your credit providers. You must pay the agreed amount on time every month – if you miss a payment then the debt review process could be terminated, which means your creditors can take legal action and you could lose your assets.
6. Your debt review is complete
When the debt review process is complete and all your debt is paid then your debt counsellor will issue a clearance certificate, which is sent to your credit providers and the credit bureaus. The credit bureaus have 7 days to remove the debt review from your credit record – it’s a good idea to check that it’s been updated.
Some other important points:
- While you’re under debt review you’re protected from legal action by your credit providers for the debt that is included in the debt review. Any debt that you’ve already received a summons for will need to be excluded.
- You need to have an income to go under debt review so that you can pay your restructured monthly debt payments.
- There are fees for debt review including an application fee, administration fee, restructuring fee, National Consumer Tribunal submission fee and attorney fee, and monthly after care fees. Be aware of these – the debt counsellor should tell you upfront what they all are.
- You can apply for credit again when your debt review has been removed from your credit record.
- If at any point you have questions or concerns, you can contact the National Credit Regulator on 0860 627 627.