Debt review is a process you can apply for at a registered debt counsellor if you have too much debt and are struggling to repay your debt. If your application for debt review is accepted, the debt counsellor will negotiate a payment plan with your creditors. This means that you can pay less each month, but for a longer time. Debt counsellors will also negotiate lower interest rates for your debt. The lower payments mean you can pay off your debt and still pay your monthly living expenses such as food and transport.
It should be noted that debt review is not a payment holiday and that you are still liable to pay their debts at reduced instalments. You should have a distributable income which will be used to offer reduced payments to credit providers. For many consumers already in debt, the idea of contracting the services of a debt counsellor may seem excessive as there are fees involved.
However, debt review fees are dependent on the consumer’s disposable income and are capped. This means that you do not have to borrow money to pay debt review fees.
Debt review is subject to certain rules and regulations. These are set out in the National Credit Act. We’ve summarised these into 10 important points, so that you know what your rights and responsibilities are if you are under debt review:
1. Check that your debt counsellor is registered with the National Credit Regulator;
2. Tell the debt counsellor all the details of your debt;
3. Tell the debt counsellor details of your income and living expenses. The purpose of debt review is to give you an affordable debt repayment plan, and that your debt counsellor needs to know how much you need for your living expense;
4. Your debt counsellor will review your application, assess your debt and apply for approval for debt review from the Magistrate’s court. If your application is rejected you can ask to see the reasons why it was rejected;
5. Make sure you know and understand your payment plan. How much you must pay, when and for how long. Your debt counsellor will draw this up and must explain it to you. If there is anything that you don’t understand, ask your debt counsellor;
6. Your debt counsellor must tell you what they charge and how these fees are paid;
7. Make your monthly payments on time and make sure you get statements showing where the money is going and how your debt is reducing;
8. You cannot take out any more debt when you are under debt review;
9. When you are under debt review your creditors cannot call you or harass you or ask for extra payments. If they do contact you, inform your debt counsellor;
10. Get a clearance certificate from your debt counsellor when you have paid off your debt. This certificate shows that you have a clear credit record and not blacklisted.
Debt review can really help you if you are in too much debt. At the end of the process, not only will you have paid your debts, you will also have a clear credit record.