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How are you legally protected under debt review?

by | Jul 2, 2021 | Personal Finance

According to the National Credit Act (NCA), everyone under debt review has the right to be legally protected. That’s great to know, but what does it mean and how are you protected? Let us explain.

 

Your rights before you apply

You have many rights when it comes to debt review, and are legally protected by these rights even before you apply. For example, you have a right to –

  • know exactly how much the debt review fees will cost you
  • know exactly how the debt counselling process works
  • know the reason why your application was rejected, if it is rejected

If you qualify, you are given even more protection.

 

Your rights after you apply

You are legally protected from the very beginning of the debt review process and for at least 60 business days after you apply.

Why 60 days? Well, making your debt more affordable isn’t easy. Debt counsellors need time to contact all of your creditors, find out exactly how much outstanding debt you have with each, and create a new budget for you.

The new budget is created to protect your family’s essential expenses and ensure that you can still take care of your loved ones’ needs. This is why we calculate your distributable income (how much money you have to spend on debt) on how much money you have left after you’ve paid for your expenses.

During these first 60 days, your debt counsellor will also send all of your creditors a payment proposal. It explains what you can afford to pay each of them per month. If everyone is happy, we will apply for a court order to legally protect your new repayment plan.

You have the right to:

  • pay an affordable reduced instalment
  • receive distribution statements from your debt counsellor and payment distribution agency (PDA) on a monthly basis
  • be updated with all changes happening during the process

 

Your application also legally prevents credit providers from:

  • taking legal action against you
  • repossessing your assets – e.g. taking your house and car
  • garnisheeing your salary

 

After 60 business days, you will stay legally protected for as long as you keep making your monthly debt repayment. If you do not stick to your repayment plan, credit providers can terminate the debt review to start legal action against you.

Beware of creditors who could try to mislead you into giving up your car or house. If you are under debt review and a collector tries to repossess your assets, contact your debt counsellor immediately. Do not give them what they ask for. Do not sign anything. Repossession is only legal when a sheriff of the court gives you a warrant of delivery.

 

Can debts be excluded from debt review

Yes. Normally, all of your credit agreements will be included in the debt review process – unless the credit provider has started taking legal action against you.

This means that if a creditor sends you a section 129 letter of demand before you apply for debt review, that particular account will be excluded. The creditor is also allowed to take you to court and claim its outstanding debt.

 

Are you legally protected after debt review?

As soon as all of your outstanding short term debt has been paid, you have the legal right to receive a clearance certificate from your debt counsellor within 7 business days. The debt review flag must then be removed from your credit report.

The only way to ensure that you get all of this legal protection is to choose a debt counsellor registered with the National Credit Regulator (NCR). At National Debt Advisors we have a whole team of registered counsellors ready to give you the best service in the country.

National Debt Advisors has been voted South Africa’s number one debt counselling company. To get a free debt assessment and an obligation-free quote, submit your details in the contact form. One of our debt experts will call you back FREE.

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