If you are struggling with your debt repayments and are interested in debt review, it’s a good idea to get a crystal clear understanding of how it works, before applying.
We have come up with a step-by-step guide to debt counselling, so that you know what to expect when you apply for debt review with National Debt Advisors (NDA).
‘You will need to give us a breakdown of your monthly expenses’
1. Application for Debt Review
Now, the first step involves filling out an application form, namely a Form 16. When you give NDA a call or when we call you, one of our consultants will do this for you.
As part of the application process, you will need to email or fax through copies of your payslips, ID and credit agreements. You will also need to give us a breakdown of what your monthly expenses are such as food, transport, rent etc.
‘We may be able to have all or some of your debt written off’
2. Over-Indebtedness Assessment
Your debt counsellor will then crunch the numbers to see if you are over-indebted. They will do this by subtracting all of your expenses from your income. If your expenses exceed your income, you will be classified as over-indebted. This means you will qualify for debt review.
They will also have a look at your credit agreements to make sure you have not been the victim of reckless lending. In terms of the National Credit Act (NCA), if your lenders did not perform proper affordability assessments, they are guilty of reckless lending. Similarly, if they granted you credit even though you could not afford to repay it.
In these circumstances, we may be able to have all or some of the debt written off, so you won’t have to repay it or any related interest at all.
‘This is NOT blacklisting, it’s protection from legal action’
3. Creditors and Bureaus Notified
The next step will be for you debt counsellor to notify all of your creditors and the credit bureaus that you have applied. The credit bureaus will then list you as being under debt review. This is NOT blacklisting, it’s protection from legal action. It will be removed from your credit profile once you’ve paid everything off.
We will also send your creditors a form and they will have 5 days to issue us with a certificate of balance or a COB. A COB simply tells us what the current balance of your account is, including accrued interest and charges. This information enables us to do the necessary calculations, so that we are able to negotiate an amount that you are able to afford. Not only will this figure be affordable, but it will also contribute to paying off your debt.
‘We always ensure our clients can comfortably afford their fees’
4. Debt Counselling Fees
At this point, your debt counsellor will also thoroughly explain the fees you are required to pay. These will include:
- An application fee
- A rejection fee
- A restructuring fee
- A small monthly fee
- A legal fee for the consent order
- A fee if you withdraw from the process later on
This may sound excessive, but remember that the rates and tariffs of debt review are regulated by the National Credit Regulator (NCR). This ensures that consumers aren’t charged exorbitant fees for services.
National Debt Advisors is an official NCR registered debt counselling firm. We ensure that our clients comfortably afford their living expenses, monthly instalments and our fees, without struggling financially.
‘We will draw up a new, more affordable repayment plan for you’
5. New Debt Repayment Plan
Your debt counsellor will work out how much of your income should be set aside for basic living expenses, and what you can afford for your debts each month. Next, they will draw up a new, more affordable repayment plan for you.
Remember, your creditors won’t be allowed to contact you or take legal action against you for 60 days after applying. Just remember, this is only if they have NOT taken legal action against you yet.
If your creditors have already taken legal action against you, we can’t include this account in your new repayment plan. This also means that you won’t be protected from legal action for this debt. This is why you should contact a debt counsellor as soon as you can’t afford to make debt repayments anymore.
6. Payment Distribution Agency’s
Once accepted under debt counselling you will pay one instalment. This will then be distributed to your credit providers via a Payment Distribution Agent (PDA). The PDA is also responsible for the provision of monthly statements to consumers and payment schedules to debt counsellors, employers and credit providers. Their role also includes attending to queries from the respective parties.
‘You will only have to make one lower payment to a PDA’
7. Negotiation with Creditors
During these two months of protection, your debt counsellor will negotiate with your creditors. The negotiation will include having your repayment term extended, and your monthly instalments and interest rates reduced.
Your debt counsellor will do this by submitting the new repayment plan to your creditors, who will either accept or reject it. If all of your creditors agree to the repayment proposal, your debt counsellor will then get a consent order from the magistrate’s court or National Consumer Tribunal (NCT).
If your creditors reject the repayment proposal, your debt counsellor can approach the magistrate’s court. They will then attempt to have the proposal declared an order of the court. However, this doesn’t happen very often. If the proposal is reasonable, your creditors will happily agree to lower payments. And we will always ensure your repayment proposal is practical and within reason.
Once your creditors have accepted the proposal, you will only have to make one lower payment directly to a Payment Distribution Agency (PDA). The PDA will distribute the agreed upon lower debt repayments to your creditors. Additionally, it will provide you with statements and payment schedules.
‘The debt counselling flag will be erased from your credit record completely’
8. Stick to the Plan!
From then on, it’s up to you to stick to the plan and make your affordable monthly payments in full and on time, until you have paid your debts off!
Once your debts are settled, your debt counsellor will issue you with a clearance certificate and inform the credit bureaus that you are no longer under debt counselling. And so, the flag will be erased from your credit record completely. Best of all, you will be debt free and can enjoy all of the benefits that come with financial freedom!