If your debts have spiralled out of control and you find yourself unable to meet your monthly repayments, you can apply for a debt review.
You can approach a debt counsellor who will examine your debt, negotiate with your creditors and come up with an affordable repayment plan. Note that your debt will not be written off, but your debt counsellor will renegotiate the interest rates and repayment terms with your credit providers on your behalf.
The benefit of debt review is that it protects your assets from repossession and provides you with 60 days of protection against legal action.
The NCR regulations state that a consumer may only be under debt review for a maximum of 5 years. However, there is no set period for the debt review process as it is dependent on each person’s unique financial situation and what can be negotiated with the relevant creditors. You could potentially be under Debt Review for 2 years or just a few months. If you can prove to the court that you are no longer over-indebted you can have the Debt Review Flag removed from your credit record.
Once you have decided to apply for debt review you will need to approach an NCR registered Debt Counsellor to complete an affordability assessment. The Debt Counsellor will review your application and assess whether your debt exceeds your ability to service it each month. You can expect to receive feedback on your financial situation from your debt counsellor within 30 days from the date on which you submit your application.
Cyber Finance is able to evaluate your application and provide feedback on your debt assessment within with in a few hours of submission.
Not sure what the role of a debt counsellor is or the benefit of appointing one we cover this topic in detail in our article Debt Management: Benefits of Debt Counselling.
Once it is determined that you are over-indebted. The debt counsellor can assist you in filling out a debt review application form (also known as a form 16). This application needs to be completed and submitted along with your credit agreements.
Your debt counsellor has 5 business days to inform the organisations that you owe money to, about your application. To do this your counsellor will issue a prescribed form (Form 17.1) to your creditors and request a certificate of balance. This is a statement that sets out your account information up to the date that the certificate is issued.
NOTE: If you are not eligible for debt review, your application will be denied. In this case, your debt counsellor will send a form (Form 17.2) to your creditors and the credit bureaus notifying them that of this fact.
The debt review processes may take some time to finalise, and your debt counsellor will issue you with an interim payment plan until the final plan is in place. You will need to continue to pay your creditors according to this payment plan and not skip any payments. Once finalised, the payment plan will be submitted to a registered payment distribution agency (PDA).
Your creditors may not take legal action against during the first 60 business days following your debt review application. This is to give your debt counsellor time to negotiate payment terms on your behalf.
It is important to note that this safeguard is only applicable if your creditors have not already taken legal action against you to recover certain debts. Such debts will be excluded from the debt review process.
If all your creditors accept the proposed repayment plan, a consent order must be obtained. This order must be obtained within 60 days of your application from either the National Consumer Tribunal or a magistrate’s court.
If the repayment plan is rejected your debt counsellor can refer the matter to a magistrate’s court. The magistrate can reject or accept the debt counsellor’s recommendation that you be placed under debt review based on the repayment plan. If the court rejects the repayment plan and recommendation, the debt review process is terminated.
Should the repayment plan be accepted by either the Tribunal or Magistrate’s Court, a registered Payment Distribution Agency (PDA) will be appointed. The PDA will receive a lump sum payment from you via your debt counsellor and will distribute the payments to your creditors each month.
The National Credit Act obliges that a debt counsellors must use a Payment Distribution Agency (PDA) to manage their client’s money. All admin fees and charges both from the PDA and Debt counsellor are included in the new payment plan. This does not affect the final payment that the consumer must pay.
The appointed PDA will submit statements and payment schedules to your debt counsellor and creditors each month. This, however, is not always an accurate balance statement, as creditors do not send the balance statements of your accounts to the PDA or Debt counsellor. If you want accurate balance statements, you must request them directly from your credit providers.
Once your debts have been repaid and it is determined that you are no longer over-indebted, you will receive a clearance certificate from your debt counsellor. Your counsellor will also notify the various credit bureaus in the country to remove the notice that you are under debt review from your credit profile on their records. However, if there are any outstanding judgments against your name, these will remain on your record for a five-year period. To remove a judgement, you will need to apply to court to have it rescinded.
Are you considering debt review to settle your debt and regain your financial health?
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