Over-indebted consumers may find Debt Counselling to be a viable option in reducing their monthly obligations until they get back on their feet.

This is a process that is used to help over-indebted South African consumers with debt relief with the goal to reduce and ultimately eliminate their debt.

The Debt Counselling process is conducted by registered Debt Counsellors empowered by the National Credit Act (NCA) to act on behalf of the consumer.  It is the prerogative of these Debt Counsellors to negotiate with creditors and make reduced payment arrangements which is in a consumer’s ability to pay.

The process is ideal for consumers with an income who are over-indebted and struggling to keep up with monthly debt repayments. Unfortunately, if you are unemployed, you do not qualify for debt review.  The Act has set timelines in which consumers will be protected against legal action.  Therefore, the sooner you apply for debt review, the better.  Once a credit provider commences with legal action, there is a risk that the particular debt cannot be included in your debt restructuring plan.  Please bear in mind that only credit agreements can be restructured.

What are the advantages of debt review?

  • A new affordable monthly budget and debt repayment plan based on your circumstances.
  • Restructuring of debts so you only pay one reduced monthly debt payment to a payment distribution agency, who will then pay all your creditors on your behalf.
  • Your Debt Counsellor will negotiate with credit providers for reduced monthly instalments by extending your debt repayment terms.
  • Protection of your assets.

What are the disadvantages of debt review?

  • Once you’re under debt review, you will not be able to apply for further credit.
  • You will be listed at the Credit Bureaus.
  • You will be liable for paying debt counselling and payment distribution fees.
  • The monthly payments are reduced, not the debt itself, and the longer you pay the more interest will be levied.

There are alternatives to sequestration, but it does come with advantages and disadvantages.

Make sure when applying for debt review, you apply through a debt counsellor certified by the National Credit Regulator.

Feel free to contact our firm should you wish to be referred to a reputable Debt Counsellor.

Leonette Ackermann
leonette@vwvh.co.za
Associate: Debt Recovery

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)