Debt review, also known as debt counselling, is a process in South Africa that allows individuals who are struggling with their debt to have their financial situation assessed and a payment plan created to help them repay their debts over a period of time. The process is governed by the National Credit Act (NCA) and is intended to help individuals avoid being blacklisted or having their assets repossessed.
The first step in the debt review process is for the individual to seek the assistance of a registered debt counsellor. The counsellor will assess the individual’s financial situation and determine if they qualify for debt review. If they do, the counsellor will then negotiate with the individual’s creditors on their behalf to have the interest and fees on their debts reduced and to have the repayment terms extended. This will reduce the individual’s monthly repayments and make it easier for them to repay their debts.
Once the negotiations are complete, the debt counsellor will present a proposed payment plan to the individual and their creditors. If the creditors agree to the plan, the individual will then make their monthly payments to the debt counsellor, who will then distribute the funds to the creditors. The individual will also be protected from legal action by their creditors during the debt review process.
It’s important to note that the debt review process is not a quick fix solution and it will take time for the individual to repay their debts. However, it does provide a structured and manageable way for them to do so. It also helps to prevent the individual from falling deeper into debt by reducing the interest and fees on their debts and extending the repayment terms.
During the process, the individual will be required to provide their debt counsellor with their income and expenditure details, as well as their bank statements. This will enable the debt counsellor to accurately assess the individual’s financial situation and create a payment plan that is affordable for them.
It’s also important to note that there are certain debts that cannot be included in the debt review process, such as mortgages and car loans. However, the individual may still be able to negotiate with their creditors to have the interest and fees on these debts reduced and to have the repayment terms extended.
One of the major benefits of debt review is that it can help individuals avoid being blacklisted. When an individual is blacklisted, it can make it difficult for them to obtain credit in the future. However, if an individual is under debt review, their creditors are not allowed to list them as a defaulting consumer with the credit bureaus.
Another benefit of debt review is that it can help individuals avoid having their assets repossessed. If an individual is unable to repay their debts and their creditors decide to repossess their assets, it can be a traumatic experience for them and their family. However, if an individual is under debt review, their creditors are not allowed to take any legal action against them or to repossess their assets.
How Long Does Debt Review Last
The length of time that a debt review will last depends on the individual’s financial situation and the terms of the payment plan that is agreed upon with their creditors. On average, the process can take between 12 to 60 months to complete.
The length of the debt review process is determined by the amount of debt that the individual has, the number of creditors they have, and the terms of the payment plan that is agreed upon with their creditors. The debt counsellor will create a payment plan that is affordable for the individual based on their income and expenditure. The individual will then make their monthly payments to the debt counsellor, who will then distribute the funds to the creditors.
It’s important to note that the individual will not be able to obtain any new credit during the debt review process and will not be able to terminate the process before the full debt is paid off. Once the individual has completed their debt review and all the debts are paid off, the debt counsellor will issue a clearance certificate, which will be sent to the credit bureaus to have the individual’s credit record cleared.
It’s also important to mention that the debt review process can be adjusted according to the individual’s financial situation, for example if their income changes, the payment plan can be reviewed and modified accordingly.
Who Qualifies for Debt Review in South Africa
To qualify for debt review, an individual must meet the following criteria:
- They must be over-indebted: This means that their debts must be greater than their income and assets, and they are unable to make their monthly payments.
They must be a natural person: Debt review is only available for individuals, not for companies or other legal entities.
They must be a South African resident: The debt review process is only available in South Africa and the individual must be a resident of the country.
They must have unsecured debt: Unsecured debt, such as credit card debt, personal loans, and store cards, can be included in the debt review process. However, certain types of debt, such as mortgages and car loans, cannot be included.
They must provide their income and expenditure details: The individual must provide their debt counsellor with their income and expenditure details, as well as their bank statements. This will enable the debt counsellor to accurately assess the individual’s financial situation and create a payment plan that is affordable for them.
It’s important to note that, even if an individual meets the above criteria, they will still need to go through an assessment process with a registered debt counsellor to determine if they qualify for debt review. The debt counsellor will assess the individual’s financial situation and determine if they are over-indebted and in need of assistance to repay their debts.
Individuals who are struggling with their debt, over-indebted and unable to make their monthly payments, and are a South African resident with unsecured debt may qualify for debt review. The process is governed by the National Credit Act (NCA) and is intended to help individuals who are over-indebted and in need of assistance to repay their debts. However, an individual will still need to go through an assessment process with a registered debt counsellor to determine if they qualify for debt review.
What Are the Advantages and Disadvantages of Debt Review
Debt review, also known as debt counselling, offers several advantages for individuals who are struggling with their debt.
What are the advantages of debt review:
- Reduced monthly repayments: Debt counsellors will negotiate with creditors on behalf of the individual to have the interest and fees on their debts reduced and to have the repayment terms extended. This will reduce the individual’s monthly repayments and make it easier for them to repay their debts.
- Protection from legal action: During the debt review process, the individual is protected from legal action by their creditors. This means that they cannot be sued or have their assets repossessed.
- Avoidance of blacklisting: Debt review can help individuals avoid being blacklisted. When an individual is blacklisted, it can make it difficult for them to obtain credit in the future. However, if an individual is under debt review, their creditors are not allowed to list them as a defaulting consumer with the credit bureaus.
- Affordable payment plan: The debt counsellor will create a payment plan that is affordable for the individual based on their income and expenditure. This will ensure that the individual is able to make their monthly payments and repay their debts.
- Reduced stress: Debt review can help reduce the stress and anxiety associated with struggling with debt. The process provides a structured and manageable way for individuals to repay their debts and can help them regain control of their finances.
- Professional guidance: The debt counsellor will provide professional guidance and support to the individual throughout the debt review process. They will be able to answer any questions the individual may have and provide them with valuable advice on managing their finances.
What are the disadvantages of debt review:
- Time-consuming process: The debt review process can be time-consuming, as it involves negotiating with creditors, creating a payment plan, and making monthly payments to the debt counsellor. This can take several months, or even longer, depending on the individual’s financial situation.
- Limited credit access: During the debt review process, the individual’s credit record will be flagged and they will not be able to obtain any new credit. This can make it difficult for them to make large purchases or invest in new opportunities.
- Lack of control: Once the individual has agreed to a debt review payment plan, they will have little control over how their money is being distributed to their creditors. They will need to rely on the debt counsellor to make the payments on their behalf.
- Limited debt types: Not all types of debt can be included in the debt review process, such as mortgages and car loans. This means that the individual may still have to continue making payments on these debts while they are under debt review.
- Cost: The debt review process can be costly, as it involves paying fees to the debt counsellor and other expenses associated with the process.
It doesn’t solve the root cause: Debt review addresses the symptoms of the problem, not the root cause. It is important for the individual to address the reason why they got into debt in the first place, so they can avoid falling into debt again in the future. - Impact on credit score: The debt review process will be reflected on the individual’s credit score, which can make it difficult for them to obtain credit in the future.
Limited to South Africa: Debt review is only available in South Africa, and not in other countries. If an individual moves to another country or has debt in another country, they will not be able to use the debt review process to address their debts.
It’s important to weigh the pros and cons of debt review and consider if it’s the right solution for your individual financial situation. It’s always recommended to seek professional help and advice from a registered debt counsellor before making any decision.
Debt Review – FAQs
Here are some common questions that individuals may have about debt review:
What types of debt can be included in the debt review process?
Unsecured debt, such as credit card debt, personal loans, and store cards, can be included in the debt review process. However, certain types of debt, such as mortgages and car loans, cannot be included.
Will my credit score be affected during the debt review process?
During the debt review process, the individual’s credit record will be flagged and they will not be able to obtain any new credit. This can make it difficult for them to make large purchases or invest in new opportunities. However, once the process is completed and the individual’s credit record is cleared, they will be able to improve their credit score.
Will I still be able to make payments on my debt while under debt review?
Yes, while under debt review, the individual will be required to make monthly payments according to the payment plan that is agreed upon with their creditors. The payments will be made to the debt counsellor, who will then distribute the funds to the creditors.
Will my creditors still be able to contact me while under debt review?
No, during the debt review process, the individual is protected from harassment by creditors and debt collectors. This includes phone calls, SMS, and emails.
Can I terminate the debt review process before the full debt is paid off?
No, once the individual has agreed to a debt review payment plan, they will not be able to terminate the process before the full debt is paid
Conclusion
Debt review is a process in South Africa that allows individuals who are struggling with their debt to have their financial situation assessed and a payment plan created to help them repay their debts over a period of time. It’s a regulated process, governed by the National Credit Act, and it is intended to help individuals avoid being blacklisted or having their assets repossessed. The process is not a quick fix solution, but it does provide a structured and manageable way for individuals to repay their debts, and it also helps to prevent them from falling deeper into debt.
In South Africa, individuals who are struggling with their debt and are unable to make their monthly payments may qualify for debt review. The process is governed by the National Credit Act (NCA) and is intended to help individuals who are over-indebted and in need of assistance to repay their debts.
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Brock Harrington is a distinguished figure in the world of finance, known for his exceptional expertise and deep insights into the complex landscape of financial markets and strategies. With a solid educational foundation and a career spanning decades, Brock has earned a well-deserved reputation as a finance guru in South Africa.
Brock’s journey into the realm of finance began with his relentless pursuit of knowledge. He earned his Bachelor of Commerce (BCom) degree, laying the groundwork for his illustrious career. His time as a student allowed him to develop a strong analytical mindset and a keen eye for spotting opportunities within the financial sector.
Building upon his early academic success, Brock Harrington went on to pursue a Master of Business Administration (MBA) degree. This advanced education not only broadened his horizons but also honed his skills in strategic financial planning, risk management, and investment analysis. Armed with these qualifications, he was well-prepared to navigate the intricacies of the financial world.
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