The Debt Counselling Process

6 Steps Towards A Debt-Free Lifestyle

The National Credit Act protects a consumer from over-indebtedness. More so, it provides solutions for these debts to be paid through payment restructuring, budget advice, and mediations with a consumers credit provider/s.

If you are new to applying for debt review and counselling, there are basically six steps you have to go through in the initial phase. After these six initial steps will then be the formal process of negotiating a proposal to the lenders and paying off your outstanding debt.

1. Details of Income, Monthly Budget and Debt Commitments

The first step is to provide the details of your monthly income, your monthly household or individual expenses and debt commitments. In this initial phase, you will need to present a debt counsellor with a copy of your pay slip, identification card (ID), and the latest statement/s of your debt.

2. Initial Assessment

The debt counsellor will then perform an initial assessment with the aid of the documents you’ve sent to check that you are over indebted. After that he or she will set up a consultation with you. This can be in person where you will be asked to report to the nearest branch for a meeting or through the phone.

3. Official Debt Counselling Application

After the first two steps of assessment, you are now able to apply officially for debt counselling. As the debt counselor verify your budget and your existing debt commitments, a new budget will be agreed and the amount for debt payments will be determined. In this phase, the counselor also provides you with details of all costs as well as an interim payment plan.

4. Negotiations With Debt Providers and Listing With Credit Bureaus

After step 3, the counselor will then contact your lenders to verify your debts and negotiate a payment proposal. You will also be listed on the Credit Bureaus that you are under debt counselling during this time you won’t be allowed to secure any more credits. The listing will stay there until you have paid everything off, then it will be completely removed.

5. Credit Providers Receives The Proposal

As your credit providers receive the proposal from your credit counselor, they may choose to accept or reject them. When the proposal is accepted, a Consent Order will be obtained from the Magistrate Court. If one or more of your credit providers reject the proposed repayment plan, the debt counselor will submit a proposal to a Magistrate Court for a decision.

Important Note: The highest court settled the contentious issue of whether sending a Section 129(1)(a) notice prevent that particular debt from being included in a subsequent debt review application in terms of Section 86. The court held at [15], “ that by giving the notice envisaged by section 129(1)(a) the credit provider ‘has proceeded to take the steps contemplated in section 129 to enforce that agreement’: a debt review relating to that specific agreement is thereafter excluded.”

In other words, if you have been already given the Section 129 Notice by your credit provider, this means that provider has already taken the steps to enforce a credit agreement with you. Whatever proposal or new credit agreement obtained during debt review cannot overwrite your credit provider’s agreement, and thus, they may reject the proposal from the debt counselor.

6. Final Repayment Plan

Once stepped five has been cleared, the debt counsellor will then proceed with the last step which is providing you with the final repayment plan and this plan will also be submitted to a Payment Distribution Agency (PDA). The purpose is to collect a single payment from you and ensure that the correct amount is paid to all credit providers you owe to on a monthly basis. This continues until the debt is paid.