Debt Review
What is debt review â This is a legal process that is included in the National Credit Act (NCA) of South Africa that was created to assist people who are drowning in debt.
While it can be viewed as a lifeline for such people it certainly is not a loan or financial assistance in any way but rather it is a process that is managed by a recognized debt counsellor.
The initial debt review process follows these steps.
- Upon receiving the request by the consumer to undergo debt review, the debt counsellor will notify all the debtorâs creditors (by form 17.1) as well as the NCR (National Credit Regulator) of the application.
- The Credit Bureau will also be informed of the consumerâs application via the NCR database and will record it accordingly
- Once any of the debtorâs creditors receives the above mentioned form 17.1 notifying them of the debtor undergoing debt review they will not be allowed to institute any legal proceedings against the creditor (unless it had already been instituted prior to the debt review being applied for).
This process therefore protects the consumer against any legal action from being taken by the creditors while being under review.
- The applicantâs application will then be inspected by the debt counsellor to assess the indebtedness of the consumer & whether debt review is the correct course of action.
As a rule of thumb a person will be considered to be over-indebted if their total disposable income after net expenses is insufficient to cover the total payments of their creditors.
So if the debt counsellor concludes that the debtor is indeed over indebted then he will apply for debt review & notify all the creditors with form 17.1 as outlined above.
- Once each creditor has been notified as above they will need to provide the debt counsellor with a certificate of balance including details of outstanding balance, the normal installments as well as interest charged.
- The counsellor will then draw up a revised re-payment schedule based on the consumerâs disposable income & affordability & present it to each creditor
- Should any of the creditors not reach consensus with the proposal the issue will have to go to court where a ruling will be made.
- Once creditors are in agreement with the payment proposal, it will still need to be ratified in court & once the order has been made the court ruling will be binding on both the Debtor (the consumer) and the Creditor (creditors)
So whilst the debt review process may provide some relief to the over indebted consumer, it is by no means an easy road.
The consumer will have to be extremely careful about spending money as their disposable income will be stretched to cover the new re-payment schedule as well as their normal living expenses & they will not be able to get out of the review process until the creditors have been paid.
Bearing in mind that anyone on a debt review is under a legal process, therefore the debt counsellor will only be able to issue a clearance certificate once the consumerâs debt has been paid in full to release the debtor from their legal obligations under this process.
Lastly, as the debtorâs financial position is often only slightly eased they are still often short of money & consequently looking for financial assistance in the way of personal loans.
It should also be mentioned that to be granted a loan while on debt review is very difficult & almost certainly will not be forthcoming from the main stream banks & financial institutions.
