Debt review in South Africa helps people who can’t manage their debts. Read this simple guide to see if it’s the right option for you.
If your debts are piling up, you may have heard of debt review. It’s a legal process in South Africa that helps people who owe more money than they can manage. But is it the right step for you? Let’s look at how it works.
ABOUT DEBT REVIEW:
Debt review in South Africa (also called debt counselling) helps you restructure what you owe into one monthly payment you can afford. A debt counsellor negotiates with your creditors on your behalf so you can cover your debts and still pay for everyday living costs.
The benefit is that once you’re under review, creditors can’t repossess things you own or take you to court, as long as you keep up with the plan.
The 7 steps of debt review in South Africa
If you decide to pursue debt review, before you get the ball rolling, check that the debt counsellor you have chosen to contact is registered with the National Credit Regulator (NCR). If the counsellor isn’t listed, walk away.
Step 1: Check the Debt Counsellor is registered
Only registered debt counsellors operate legally, unregistered advisers can charge fees and offer poor outcomes.Your debt counsellor will look at your income, expenses and debts to see if you qualify for the process.
Step 2: Letting creditors know
Your counsellor will tell your creditors and the credit bureaus that you’ve applied for debt review.
Step 3: Confirming over-indebtedness
Using the financial info you’ve provided, the counsellor will decide whether you’re officially over-indebted.
Step 4: Drafting a new plan
If you are officially over-indebted, they prepare a repayment plan for you and their negotiations begin with your creditors.
Step 5: Court or tribunal approval
Your plan is taken to court (or a tribunal) who make it legally binding, especially if not all creditors agree.
Step 6: Starting repayments
At this point, you begin paying through a Payment Distribution Agent, who distributes the money to your creditors.
Step 7: Finishing strong
Once you’ve repaid all your debts under review, you are given a clearance certificate. The debt review flag is removed from your record.
THINGS TO KEEP IN MIND:
Debt review can make your monthly payments easier and give you breathing room, but it also comes with conditions:
- You are not allowed new credit until you’ve finished the process.
- It’s not a quick fix and repayments can take up to five years.
- There are fees for the counsellor and the distribution agent.
Other ways to deal with debt
Debt review isn’t the only option. You could try debt consolidation, which means taking out one loan to settle several smaller ones. This can simplify payments, but you’ll still need to qualify for the loan and can result in you owing more money and making your problems bigger
You can also speak directly with your creditors to agree on new terms. Or, with guidance from a financial adviser, you may be able to manage your debt through tighter budgeting and expense planning.
At the end of the day, debt review can be a lifeline if you’re drowning in debt and facing the threat of legal action. But if your debt is smaller, you may not need the full process.
It’s your call but always remember, there’s help on the other side of the Finance365 line.
Still feeling unsure? Speak to a National Debt Counsellors and get advice for your situation. Before that call, grab your latest credit report. It’s quick and free from us and helps everyone on your team to see the full picture.
