Debt Counselling

Debt Counseling​

A sincere Thank You to Gerhard Stoltz Debt Counselor for assisting with relevant information for this page. From a dismissal point of view, Debt Counseling can play an integral role where the employer aims to assist employee’s who lost their jobs for reasons of, for instance, restructuring and retrenchment.

 

What is Debt Counselling?

The National Credit Act, No. 34 of 2005, provides for a debt relief mechanism whereby consumers who are over-indebted can apply for debt review. If found to be over-indebted a consumer’s debt repayments will be restructured and reduced to an amount that the consumer can afford.

The aim and purpose of the said debt relief mechanism provided for in the Act is, therefore, to assist consumers to lead a normal economic life without being pressurised by credit providers for payment in circumstances where a consumer can no longer afford to honour their payment obligations to credit providers

A consumer will be over-indebted if, after providing for the monthly living expenses and maintenance requirements of himself and his dependants, he is unable to afford his monthly payments to all his creditors.

By utilising the debt relief mechanism provided for in the Act (debt review) a consumer can, for example, prevent his assets (including his home and motor vehicle) being foreclosed upon by unsympathetic credit providers. What is more, a credit provider is, in terms of the provisions of the Act, obligated to participate in the debt review process and therefore cannot avoid it.

In the final analysis, once a consumer’s debt obligations have been restructured the consumer will be financially liberated and will henceforth be able to afford both his monthly living expenses and his payment obligations to his creditors in reduced installments that are affordable to the consumer.

How does the Act protect consumers?

  • By providing for a debt relief mechanism whereby debt can be restructured in the event of a consumer being over-indebted. This debt relief mechanism is called Debt Review or Debt Counselling.
  • By prohibiting and preventing unfair credit and credit Marketing practices.
  • By promoting responsible credit granting.

What is the Debt counseling procedure?

A consumer who believes that he is over-indebted will apply to debt counselor for debt review

The Debt Counsellor will either himself or via his assistant(s) obtain such information, inclusive of documentary proof, relevant to the consumer’s financial circumstances. This includes payslips, bank statements, and all available creditors’ statements.

The Debt Counsellor will supply the consumer with an application form who will be required to complete the form with all the relevant information relating to himself and his creditors as required by the National Credit Act. On completion of the application form and signature by the consumer, the Debt Review process will begin.

While under debt review a consumer is not allowed to incur further debt. For this reason, the Debt Counsellor will, after receiving a completed application form, register the application with the NCR and list it with all credit bureaus. This listing is not a blacklisting or a bad credit rating but it is done for the sole purpose of Section 88 of the Act and the listing must be removed within 5 business days after the debt review process comes to an end. The debt review process ends either when the consumer is no longer over-indebted and decides to cancel his debt review or when all his credit obligations have been settled.

The Debt Counsellor will notify all the consumer’s credit providers in writing of the fact that the consumer has applied for debt review. By notifying the consumer’s creditors it is ensured that all the consumer’s creditors are aware of the fact that he/she applied for debt review and that they are not allowed to institute legal proceedings against him/her with regards to the collection of monies owed to them on those accounts. Should a creditor, however, have issued Summons before the application date that specific account cannot be included. This does not, however, stop the Debt Counsellor from assisting the consumer with the rest of his accounts.

During the 60 business day period, the Debt Counsellor will determine the amount that a consumer will be able to afford a monthly payment towards his creditors by taking the consumer’s monthly living expenses into account. With this amount as a basis, the Debt Counsellor will prepare a debt restructuring proposal. This restructuring proposal will be discussed between the Debt Counsellor and the consumer to ensure all relevant information was included and thereafter the proposal will be sent to the consumer’s creditors for their consideration.

The creditors concerned will have an opportunity to review the recommended proposal and to decide whether to accept or reject the Debt Counsellor’s debt restructuring proposal.

Should the credit providers accept the proposal the Debt Counsellor will convert it to a consent order and the consumer will continue with making the restructured and now affordable payments towards these creditors.

Should one or more of the credit providers not accept the restructuring proposal the Debt Counsellor will negotiate with them, and if negotiations are unsuccessful, the Debt Counsellor will facilitate that the debt review application of the consumer be submitted to a magistrate for consideration accompanied by the Debt Counsellor’s recommended debt restructuring proposal and supporting documents. It is then for a Magistrate to decide if the restructuring proposal is reasonable and if found to be so, to make it an order of the court. The creditors are bound to comply with this court order and to accept the new installments.

When the debt review amount is determined the consumer will start with payments towards the PDA (Payment Distribution Agency). It is the PDA’s task to make distributions to creditors. The consumer makes one payment every month and the PDA, under the watchful eyes of the Debt Counsellor, takes responsibility for the distributions to the creditors in terms of the restructuring proposal.

Do you qualify to apply for debt counseling?

  • Any consumer who is over-indebted.
  • A consumer will be over-indebted if, after providing for the monthly living expenses and maintenance requirements of himself and his dependents, he is unable to afford his monthly payments to all his creditors.

What are the advantages?

  • Whilst under debt review the consumer enjoys complete protection from his creditors;
  • The consumer’s monthly payments to creditors are reduced to an affordable single monthly payment;
  • Creditors are prohibited from taking legal action against you, including issuing of Summonses or Repossessing assets;
  • Creditors and Credit Bureaus are contacted on your behalf;
  • The consumer’s peace of mind and joy of life is restored;
  • The consumer can once again lead a normal economic life.

Who can assist an over-indebted consumer? 

  • A Debt Counsellor registered in terms of the National Credit Act.
  • All Debt Counsellors are monitored by the National Credit Regulator (NCR) and is duty bound to abide by the dictates of the Act and the guidelines that are issued by the NCR from time to time.

What is the role of the debt counselor? 

  • To assist consumers who are experiencing debt related problems in accordance with the provisions of the National Credit Act.
  • To assist consumers who are experiencing debt related problems in accordance with the provisions of the National Credit Act.

What is the relationship between the Debt Counsellor and the consumer?

  • The relationship requires utmost good faith.
  • The consumer must be mindful that the Debt Counsellor will, on the strength of the information provided by the consumer, objectively and in good faith negotiate the restructuring of the consumer’s payment obligations with the consumer’s creditors. The debt review process is founded on and requires an impeccable work ethic and there is no score for material nondisclosures and misrepresentations.

When and how will the debt review process come to an end?

The approach is to endeavor, as far as is reasonably possible, to render the consumer debt free within 60 months. If a bond or vehicle forms part of the included debt it will take longer.

Once all the consumer’s credit providers have been paid in full the Debt Counsellor will issue a clearance certificate bringing the debt review process to an end.