Debt Review South Africa Everything You Should Know 2020

Debt Review Process Simplified

Through a very simple and uncomplicated process we will register you with NCR, which automatically protects your assets and you from anyone you owe money to, so it includes banks.  You will become untouchable, where contact by any creditor with you is not allowed.  And in that breathing space we will help you rebuild your finances so that you can move forward and enjoy life again.

Do you need help with your debt?  Great, because we are here to help you rebuild.

What is Debt Review?

Simply, Debt Review is a process of handing over your debt negotiations to a Debt Counsellor, a person who becomes your go-to person, who will compile your debts, look at your income, and with you, work out a payment plan on your instalments & interest options with creditors; and then your go-to Debt Counsellor negotiates on your behalf with all your creditors. Debt Review makes your debt affordable while protecting you from asset repossession, legal action and creditor harassment.

Debt Review Benefits For You:

  • One reduced affordable monthly instalment for all your debt
    • Reduced instalments with all creditors
    • Reduced interest rates with all creditors (where negotiated)
  • We deal with your creditors directly, so you don’t have to
    • Creditors may no longer harass you for payment
  • There is a structured repayment plan with an exit date as a goal
  • You will have enough money to pay your living expenses
  • Your assets will be protected against legal action
  • You end the process debt free and eligible for credit again
  • There are reduced credit life insurance premiums

If this sounds good to you, then you will be pleased with the ease of the process to achieve this!

How does debt review work?

Step 1: Lets look at your financial situation and work out your debt profile.  Step 2: Getting all the paperwork together for a formal review  Step 3: We call for Confirmation from your creditors & work out a repayment schedule with you.  Step 4: We list you on the National Credit Bureau’s NCR Debt Help database  Step 5: NCR notifies credit bureaus that you have applied for debt review.  Step 6: We negotiate with all creditors to confirm a repayment plan  Step 7: Creditors confer for agreement and a consent order is issued  Step 8: You start paying your debt with peace of mind.

Here is a video expalining the debt review process, step by step

Debt review steps

How Debt Review Works InfographicStep #1: Before you officially apply for debt review use our free online debt review calculator to see how much you can save with debt review, we have a look at your current financial position; we work out your income vs your living expenses, and then we look at your debt exposure. If you are over-indebted, we start the process of Debt Review if this is the best solution for your situation.

Use our free Debt Review calculator and work out how much you could save each month!

Step #2: Once we’ve had a look at the basics, your go-to Debt Counsellor will send you a formal application (it’s called Form 16); this collects all your personal information, income, expenses and creditor information and all your debt information, such as bond accounts, vehicle finance agreements, loan agreements, clothing accounts, arrear doctor bills – all your debt.

Step #3: We know that most people have never asked for Debt Review help, so we are taking the time here to give you all the detail so that you know exactly what you can expect.  Once you have signed the Form 16 we will send a notice (known as Form 17.1) to your creditors. This notice informs your creditors that you have applied for debt review and your financial situation is being assessed. It further requests your credit providers to issue your Debt Counsellor with a Certificate of Balance (COB).

Step#4: This COB is a summary of your contract with the creditor and confirms the outstanding balance, interest rate, remaining term etc. of your credit agreement. During this phase of your Debt Review your Debt Counsellor will also list you on the National Credit Bureau’s NCR Debt Help database upon which you will be allocated an NCR number as confirmation that you have applied for debt review.

Step #5: The NCR will notify all credit bureaus that you have applied for debt review. This is to ensure you do not incur further credit whilst having applied for debt review.  Before your Debt Counsellor proceeds to the next step you can still withdraw from the Debt Review process by giving your Debt Counsellor a written instruction that you wish to withdraw.

Step #6: If your Debt Counsellor does not receive a notice to withdraw, your go-to person will proceed with the next stage by assessing your financial position with the COB’s (your creditors confirmations of your debt). This process again confirms that you are over-indebted, and we then confirm this with a Confirmation of Over-Indebtedness Notice (Form 17.2); we then use the information provided on the COB to draft a repayment proposal to your credit providers.

This repayment proposal will display a list of all credit providers, the current outstanding balances as per the COB’s received, the offered instalment, interest rates and repayment terms of your debt review proposal. The good news is that in some instances the interest rates are reduced to 1.0% on unsecured debt. This is just one of the ways in which Debt Review works for you.

Step #7: The Debt Counsellor and Credit Providers will then negotiate the repayment terms of the payment proposal and should all credit providers consent to the proposal the matter will be referred to the National Consumer Tribunal for a Consent Order. In the instance that one or more credit providers do not consent to the proposal the matter will be referred to the Magistrate’s Court in your jurisdiction for adjudication. In most instances you do not have to attend these hearings and the attorneys appointed by your Debt Counsellor attend to this.

Step #8: You start paying your debt review instalment from the same month as you have signed the Form 16 meaning you no longer have to pay your credit providers the contractual instalments. All Debt Review payments are made to a Payment Distribution Agent (PDA). In terms of the National Credit Act each Debt Counsellor must contract a registered PDA in order to distribute the payments of its clients to the relevant Credit Providers. The PDA will distribute the funds to your creditors until you have settled all your debt. More on the PDA and distributions later in the article.

Your go-to Debt Counsellor takes it all from here.  No more creditor harassment.  Your go-to liaises with your creditors which means you do not have to. Ever.

Our professional team will assist you every step of the process and attend to all creditor queries on your behalf.

How much will debt review cost you?

The Debt Review fees are prescribed by the National Credit Regulator, so you will not be charged more or less, as we adhere to the NCR Fee Guideline

This fee is all part of the process as it is paid over by the PDA to us.  Once this is paid, the PDA start paying your creditors.  You will see this reflected in your debt restructuring payment plan issued to your creditors.  It is an industry-standard in the process, so it isn’t considered a default in payment to creditors whilst you are settling the Debt Review fees.

Where does your money go?

Once the Debt Review fees are settled, the PDA will distribute payments to your credit providers as per the payment proposal submitted to them. The PDA keeps record of all payments and outstanding balances which will appear on your monthly statements emailed to you, keeping you updated every step of the way.

What happens as each creditor’s bill is paid in full?

Once an account is settled in full the instalment of the paid-up account is recalculated into the remaining creditors, this means that each creditor will receive proportionately more, as creditors are being settled. This is also known as the cascading payment effect ensuring you exit debt review in the shortest time possible.

What happens if crises hits whilst I’m in Debt Review?

The National Credit Act allows for serious events like retrenchment and expensive vehicle breakages as a couple of examples; so, it does allow you the opportunity to overcome these events without the additional financial burden of their debt obligations. This process is called a Payment Postponement Application. We use these applications to request the Court to grant an Order in which the Court postpones the date on which payment is due to Credit Providers, by up to six months.

A practical example of this application is when someone is going on maternity leave and will only receive UIF for the four months she is leave. UIF only pays a portion of the salary for maternity leave. This means that most likely she will not be able to afford her living expenses and debt obligation. We then approach the court for the Order, and if granted she will not have to pay her debt, included in the application, for the four months she is on maternity leave.

When she is back at work, the payments will start again.  While there is a postponement on the payments, the interest due on the accounts will still be allocated to the accounts.  It must be noted that these applications are only applicable to unsecured debt, which would be debt that excludes bond and vehicle finance accounts.

What happens if I do not pay my Debt Review instalment?

This is your only responsibility when it comes to a debt review application. From the date of inception your debt review instalment is due without default. Should you default on these payments it will have serious repercussions.

What is a default payment under Debt Review?

A default in payment is when you pay:

  • less than the agreed instalment
  • you pay later than the prescribed date
  • you do not pay at all

In terms of Section 86(10) of the National Credit Act a Credit Provider may terminate the Debt Review when a consumer defaults in payment and proceed with legal action against the consumer in terms of Section 88(30) of the Act, this means that your creditor may immediately issue summons against you. When this occurs, the creditor does not issue for the arrears or defaulted amount due to them, but for the total outstanding balance of the agreement.

This means that should you have a home loan account in your debt review application and you default, it is very likely that you will lose your property. Repayment arrangements will need to be negotiated with these credit agreements outside the debt review which means that these accounts will be listed under your monthly expenses as a normal expense. The renegotiated interest rates and reduced instalments will also no longer be applicable.

This is not only applicable to debt review but also to defaults which occur for accounts not part of a debt review application.

All is not lost – should only some of the creditors terminate their accounts from debt review due to a default, the remaining credit agreements may still be part of the debt review, but the entire application will need to be redrafted in order to exclude the terminated accounts and amend the repayment instalment accordingly.

To enjoy the protection and relief that the process offers, you are obliged to honour your debt review agreement by ensuring payments occur without default.

How do I exit Debt Review?

You can withdraw from debt review prior to the Form 17.2 Notice being issued by providing written instruction to the Debt Counsellor. Once the 17.2 Notice has been issued the withdrawal procedures change. Seeing that the Debt Counsellor has confirmed you are in fact over-indebted to the Credit Providers, you will need to launch a formal Court application to prove to the Court that you are not over-indebted. Only once such an application is granted will the Debt Counsellor remove the debt review listing from your credit profile by informing the National Credit Regulator. Should you fail to follow this process the debt review status will remain on your credit profile until such time as all your debt is repaid.

When am I debt free?

Once you have settled all your debt, except for your bond, your Debt Counsellor will issue you with a Clearance Certificate confirming you have settled all the debt and are now debt free. Subsequently you can reapply for credit should you wish to do so. There is no rehabilitation period applicable to you once you have settled all your debt, and you can comfortably re-enter the credit market.

Sound too good to be true? What are the cons of Debt Review?

  • Once you have applied for debt review you can only exit the process by:

1) paying up all the debt

2) by bringing an application to Court to confirm you are no longer over-indebted.

  • While in debt review, you cannot access further credit. You cannot use your store cards, credit cards or apply for a loan. Once you have exited the process, you can reapply for credit.
  • Debt Review demands commitment as you cannot skip payments. Should you default on your payments, your creditors may proceed with legal action against you.
  • Be aware of incompetent Debt Counsellors. Make sure you use a credible Debt Counsellor with a good reputation and industry experience.

Debt Review is designed to help you help yourself and ensure that creditors are paid what they are due.  Your creditors meet you half way by accepting extended payment terms at reduced repayments, with lower interest rates.  Debt Review is working together to raise our nation out of the considerable debt that we find ourselves as individuals, and a country, in.  It is designed to help you.

Can you avoid debt review?

These are some practical pointers that can keep you from the necessity of protecting your assets and avoiding costly and intrusive legal action.

This video expalins how to get out of debt, the self help way

Be Realistic

Debt Review is not for everybody and there are various ways you can avoid Debt Review if your financial position allows for it. There is an almost endless list of reasons we become over-indebted, some avoidable, some unavoidable, like being retrenched, the increased cost of living and the expenses of it, getting a divorce can be very costly, gambling problems feature here.  Your life-style choices can affect whether you float or don’t float financially.  And then some things you have no control over.  So, make a real decision about what is best for you.

One of the biggest mistakes we make is being forever optimistic and saying, “things will be better next month”, but “better next month” often can’t and doesn’t arrive.  And if we don’t keep our heads up and look at our situation realistically, we will wake up to a decent size hole, neatly placed in the middle.  So, heads up, out of the sand, and be real.

Don’t Take New Loans To Pay old Loans

Another big mistake is taking out new loans to pay current loans. Don’t be misled, we are not talking about consolidating your loans, we are practically talking about having ten loans today due for payment tomorrow, and then taking out loan number eleven to pay the instalments of the ten loans due tomorrow. This is obviously a massive mistake.  Think about it.  Reasonably you cannot afford the instalments of the ten loans you already have, so how on earth are you going to afford the instalments of eleven loans next month? A better option for you will be to realise that you have too much debt before applying for loan eleven.

Let’s take a look at the following scenarios to explain some of your options.

  • What To Do Instead of Taking New Loans
  • The “this is just temporary” scenario

What To Do Instead of Taking New Loans

Let’s be clear, we are not talking about the person being the forever optimist and telling themselves next month will be better, we are referring in this scenario to the person who has had an emergency expense and for this reason cannot pay all their creditors their full instalments this month.  Here prize one is contacting your creditor, explaining by email your situation and asking for a reduced instalment for the month.

So, negotiate to reduce your monthly payment, and then offer to restructure the shortfall into your contract period.  You will be amazed at how open creditors are to a good, well intentioned, plan of repayment. It is not enough to merely notify them, after all you owe them money and you are in a negotiation; so, make sure you send your request and offer in writing, and receive a response by writing.  This is important too, as you need to keep these communications as proof should a future dispute arise.

In the instance that you need a longer relief period (3 to 6 months) some creditors are willing to offer you a reduced instalment during this period and either extend your contract period by a month or two or recapitalise the defaults into the remaining contract period. Please remember that in most instances any default on your contractual agreement with the credit provider will reflect as a default on your credit history and could influence your future credit scoring.  So, negotiate, don’t default.

The “this is just temporary” scenario

The “maybe I am just spending too much” scenario where we take a look at our spend and where we can cut back.

This may seem to be an easy fix but once you attempt this exercise you realise that it is much more difficult than initially expected. The one reason for it being difficult is that during this exercise you realise the amount of money you are actually wasting each month, and then you start thinking about how long you have been doing this for, soon you find yourself calculating the amount of money you could have saved by now.

It might be a realistic way forward, but do not attempt this if you are not going to be serious about it, and most importantly, have your goal in mind.  Also include your partner or spouse, as this is a family matter and a serious one to say the least. So, collaborate with your new budget.

How to draft a budget

We would suggest that the easiest way to draft a budget is to start with nothing. Think about it, if you had no source of income, you would have had nothing and would not be able to buy anything anyway. In short, all the things we usually list as “have to haves” are untrue as some people go without them. Start with the absolute bare necessities, like groceries (the survival groceries), transport (to and from work), housing (bond or rental expense), school fees etc.

If you rent a property take into consideration that your current rental expense might be excessive, and you could just as well survive in a cheaper house until such time as you have worked your way out of your debt crisis. Here is more information on how to draft a budget.

Calculate your bare necessities

Once you have calculated your list of bare necessities, then compare it to your debt instalments. In most instances you will realise that suddenly you can afford your debt repayments. If not, contact us as you are clearly over-indebted.

Managing your creditors

Not over-indebted?  Manage your creditors by listing them from smallest to largest. Find a hundred or couple hundred rand in your budget and allocate this money to your smallest creditor. Then combine these extra Rands with your payment owing and pay this bigger instalment to the account until it is settled in full. Once this creditor is settled in full, take the instalment of this creditor plus the additional amount you paid to it, and add this to the next smallest creditor.

Continue this process until you have settled all your creditors. You will be shocked to see the amount of interest you save by following this method.  In our Debt Review process this is the secret, it’s called a cascading payment effect.  And it works.

Feeling nifty with budgeting?

There are various budget apps one can use to track your budget in order to ensure you stay within your prescribed budget, one being Good Budget which proves to be very simple and effective.

How did debt review come to life?

Debt Review, also known as Debt Counselling, came into effect with the amendments to the National Credit Act in 2007. This was mostly due to the current relief processes, of which Administration is one, that did not bring any relief to consumers with a debt of more than the fifty thousand rand (as a threshold), as prescribed by the Administration process.

Not everyone was happy with Debt Review

Debt Review was born with much skepticism from consumers and great opposition from some banking institutions. The biggest concern from the banks was that we are protected under Debt Review from foreclosure and sale of property – as debt review protects us from repossession and legal action once applied for.

Not everyone understood the process

During the first phases, admittedly, Debt Review was a very difficult process for both Debt Counsellors and Credit Providers. As with most new legislations initially no one really knew what was going on and how to treat these applications fruitfully. It was all trial and error based, with hopes that it had the desired results. During these times Debt Counsellors were still figuring out office processes and the same went for the banks.

Even the Courts did not really understand how to handle these applications rolling over their desks. Many Orders were granted in error and even contradicted the National Credit Act as Magistrates were, like the rest of us, dumped into the Debt Review pool to sink or swim. Luckily for the best of us we managed to doggy paddle our way to the success that the Debt Review process is today.

Watch out for unscrupulous Debt Review companies

The process is, in the majority of instances, faultless, with the exception of a few unscrupulous Debt Counsellors and some Credit Providers who still do not have their house in order more than a decade later. Fortunately, there was a group of Debt Review specialists who believed that in due course, the process will have removed the bad apples from our industry.

Here is an explanation on how to choose the right debt counselor by Cornel Strydom

 A tried and tested process today

The Debt Review process has successfully helped hundreds of thousands of consumers throughout South Africa, across all demographics. We believe this is mostly due to the process catering for almost every over-indebted person, or someone feeling the financial pressure.

There is no limit to the amount of debt that may be included in a Debt Review application and therefore the process assists all.

Debt Review is structured in such a manner that it is affordable for all and as simple as completing an application form and signing it. It’s important to remember that there is no stigma in registering for debt review because registering is an indication that you are committed to your obligations, this is why you can re-enter the world of credit finance when you are debt-free once more.

Debt Review is a constructive and successful process designed to help you get back on your feet. 

There is no need to suffer silently with debt. Schedule a free and confidential chat with a debt counselor today.