What is a Debt Review Agreement?
Before drawing up your debt review agreement, your debt counsellor will assess your financial affairs to determine whether or not you are over-indebted. If you can’t afford to service your debts, as your outgoing expenses exceed the income you make, this means that you are in a state of over-indebtedness.
At which point, your debt counsellor will inform your credit providers and the credit bureaus that you are under professional debt review, and that they are your official debt counsellor.
As such, they will draw up an interim debt review agreement, proposing new debt repayment terms, and accordingly submit this proposed agreement to a payment distribution agency (PDA).
How Will Debt Review Help Me?
During a term of 60 working days, your credit providers will be prohibited from taking legal action against you, in respect of your outstanding debts.
Once you have settled all of your unsecured debts, your debt counsellor will issue you with a clearance certificate. In addition, they will notify your credit providers and the credit bureaus that you have fulfilled your debt review agreement.
Moreover, any information listed under your credit profile, indicating that you were at one point under debt review will be permanently removed.
The Don’ts of Debt Review
- DON’T MISS A PAYMENT. Sticking to your debt review agreement is simply not up for debate – it’s an absolute necessity, as skipping even a single payment will annul the agreement.
- DON’T USE CREDIT or apply for loans. Cut up your credit cards and don’t apply for anymore loans! Any lender willing to grant you a loan is reckless and unscrupulous, and the loan illegal. Using your credit cards or applying for loans puts you at risk of being kicked out of debt review, which is an outcome you must avoid at all costs.
The Dos of Debt Review
- DO STICK TO YOUR DEBT REVIEW AGREEMENT. Remember that your debt review agreement is the only thing standing between your credit providers and your assets or salary. Failing to stick to the programme means giving up the protection of debt review.
- DO REVISE YOUR BUDGET. Not only while you are under debt review, but also after you receive your clearance certificate. This is the only way to ensure that once you get debt free, you stay debt free.
- DO SAVE THE SURPLUS. You’re going to have more cash at your disposal, once you don’t have to make debt repayments anymore. This should not be used as an opportunity to splurge, but rather as way to build up savings, so you’ll never have to go through the ordeal of being over-indebted ever again!