What does Debt Review Entail?

Drowning in debt? Are your financial obligations on your house, cars, credit cards weighing you down? You are not alone on this one. Lots of South Africans are battling to meet their financial commitments.

If your monthly obligations are weighing you down and you are facing blacklisting, one option is to go into debt counselling or debt review. The debt review process was introduced in 2007 with the National Credit Act (NCA). The benefit is that, while you are getting debt counselling and in the process of paying off your debts, legal action can’t be taken against you.

Remember, you can only take advantage of this process if you have a regular income to develop a reasonable repayment plan.

1. When you apply for debt review, the debt counsellor will assess whether you are over-indebted or whether or not you creditors were reckless in granting you credit. They will have 30 business days from the date of your application, to make this determination.
2. Within five business days of accepting your application for debt counselling, the debt counsellor must inform all your creditors and the credit bureaus of your application.
3. Your debt counsellor will draw up a repayment plan so that you can continue to pay your creditors in the interim.
4. During the first 60 business days from the date of the application of your debt review process, legal action may not be taken against you in respect of debts that are “under review”. This means that if the credit provider has not already proceeded with legal action against you, you have two months in which to negotiate a payment arrangement. However, if the creditors have already begun taking action against you, you unfortunately do not enjoy this protection and those debts can be excluded from your debt counselling.
5. Your debt counsellor will then determine whether you are over-indebted or not; then he or she will draw up a repayment plan to rearrange your debt obligations in line with what you can realistically afford. If the credit providers accept the repayment plan, then the PDA will channel your revised payments to your creditors. You will make these payments directly to the PDA as it is their responsibility for providing monthly statements to you and payments schedules to your debt counsellor and creditors, as well as attending to queries from respective parties.
6. Once all of your debts have been paid, your debt counsellor will issue you with a clearance certificate and will notify the credit bureaus that you are no longer in debt counselling. Your record will then be cleared, however if you had judgments against you, these will remain on your record for the remainder of the five-year data retention period.

The most important thing you need to remember is that there is a rejection fee of R300 plus VAT if the debt counsellor decides that you can manage your debt, so make sure that you are really battling to make your payments.