Debt Review South Africa

By the end of 2010, the National Credit Regulator of South Africa estimated that 200,000 debt review applications have been received. The figures show that there are between 7,000-8,000 new applications received by the NCR office every month.

Are you desperate about your repayments? Does money get tighter as each day passes that you cannot pay off your debts anymore? You are not alone.

Getting Out of Debt

Credits, loans, debts are realities of modern life. They are not inherently bad. Household get into debts in exchange for realization of dreams such as funding for education or capital for a business venture; personal development; home improvement; and even surprises such as increased taxes or health emergencies.

However, things can get ugly down the road as circumstances change. This can be a retrenchment, business failure, or simply mismanagement of monthly income and expenditures and the lack of savings. Wherever you are in the spectrum, there exist one or more solutions to try for debt relief. One of them is debt counselling.

Through debt counselling, an individual who is over-indebted will go through a debt review process.

In this process, the individual will go through 2 stages:

1. Debt Review Assessment

Once a consumer has contacted a debt counselor for help, the debt review assessment will commence. In this initial stage, the counselor will conduct an affordability assessment of the individual consumer having problems with his/her capacity to pay debts. At the start of the application, an individual is to pay R50.00 as application fee.

The registered counselor will be the one to determine in the assessment if the applicant is truly over-indebted or not by looking at his/her current financial position. He/She will be declared over-indebted if his/her total monthly debt repayments exceed what’s left of his/her monthly expenditure on basic living expenses given his/her monthly income.

If the counselor finds the individual to be, in fact, over-indebted then the application is accepted. A debt restructuring proposal will be made which includes the amount available that the consumer can repay the debt given his/her current financial status. This stage also determines how long the individual consumer will remain under debt counselling.

An application will be rejected if the individual consumer has zero income available for debt repayments or if there is no prospect of finding income within a 3 month period to continue paying off debts.

Once you are accepted into debt review by a debt counselor, you will have to stick with the monthly budget the counselor has given all throughout the period you are under debt counselling. This budget is a realistic and sustainable one for you and your family while repaying your debts.

2. Formal Debt Review Process And Negotiations

The task team on debt counselling of the National Credit Regulator has proposed an enhanced set of debt review process guidelines or rules to be followed to the letter by every debt counselor in the country. This aims to ensure a smooth ride for all parties – the consumer, the credit providers and the debt counselors mediating between them. This will also help implement a win-win situation for both the credit providers and the individual in debt.

From here on, the debt counselor works with contacting the credit provider and submitting a proposed repayment plan. He/She will also update the individual with progress or non-progress and take necessary steps after consulting with the individual of legal matters where applicable. As for you, the consumer, it is important to bear in mind the full voluntary cooperation and active participation is needed for the whole process to work.