The debt review process was introduced under the National Credit Act 34 of 2005 (‘NCA’) and was created by government to address the increasing problem of consumer over indebtedness throughout South Africa.
To solve the plight of rising debt, the debt review process is designed to make it simple and manageable for the consumer to repay their debt, while also being able to afford their daily and monthly living expenses.
This process can only be carried out by a qualified NCR Debt Counsellor and is conducted in a highly regulated environment to ensure maximum consumer protection.
Debt review is a process that holds many advantages for the consumer, not least of all that it outlines a clear and simple path towards fulfilling debt obligations in an affordable and achievable way. Set up to protect the consumer, debt review enables their financial security, legal protection, and achievable debt fulfilment. In this article, we take a closer look at how this highly beneficial process is carried out.
The debt review process begins after an assessment of your debt is completed by a debt counsellor. The debt counsellor must be qualified by the National Credit Regulator (NCR) to make such an assessment and to set up your debt repayment plan. Such an assessment is typically offered free of charge by National Debt Counsellors six days a week.
This assessment determines whether you are indeed in a state of over indebtedness, which means that your monthly repayment requirements are higher than you can afford. Once this has been confirmed, you are sent a Form 16, which consists of a summary of your debt, your monthly repayments, and a new budget that allows you to fulfil these repayments in accordance with an amount you can reasonably afford.
The Form 16 also includes a revised debt review plan which outlines your proposed repayment figures, restructured to allow you to successfully meet all of your debt obligations in one reduced monthly instalment. Upon approval of your Form 16, all the relevant credit providers are notified of your debt review status by the debt counsellors. From this point on, you are legally protected from being contacted by your creditors. What is more, your assets are also legally protected and cannot be repossessed for the duration of the debt review process.
Following this, your debt counsellor begins the important work of negotiating your debt repayment plan with your credit providers. Based on the positive working relationship which National Debt Counsellors maintains with all the major credit providers, as well as the leading industry knowledge of its expert team, your debt counsellors negotiate a reduced repayment plan, usually with lowered interest rates, over an extended period.
On conclusion of these negotiations, the accepted plan is sent to a national network of attorneys who make it an official order of the court. This step secures your ongoing legal protection. With this new payment plan secured by the court, you can continue to make your reduced monthly instalment until your debt is paid off.
Once your debt obligations have been paid in full, your debt counsellor issues you a clearance certificate, which provides you with a clean credit record and removes the debt counselling flag from your profile. After this certificate has been issued, you are officially debt-free, and allowed to apply for credit in the future if you require.
