47 Frequently asked questions about debt review – Answered.

By The National Debt Review Center

In this section, The National Debt Review Center provides answers to questions that we frequently receive from potential and existing clients with regards to going under debt counselling/ debt review, as well as any other debt-related topics. For further information, please contact us at info@ndrc.org.za or phone 0410125036

How does debt consolidation compare to debt counselling?

They are two very different ways of dealing with debt, be it bad credit debt or how to avoid bankruptcy or over-indebtedness.

First of all debt consolidation or “free debt consolidation” (there is no such thing as “free”) as some people refer to it, involves borrowing more money which involves more interest payments than before.

The difference is Debt Counselling or Debt Review will get rid of debt, by paying it off at an affordable rate and help you get out of debt, without borrowing more money and paying more interest. You will also have a good credit score again.

Debt counselling puts an end to the borrowing of money and additional unnecessary interest that comes with debt consolidation.

Debt consolidation, most times, increases the amount of interest over the repayment period. It also increases your total monthly repayment figure.

Debt counselling pegs the rate of interest you may be charged, reduces your total monthly repayment figure, which leaves you some money over every month to live on.

The best free debt advice we can give you is to seriously consider debt review or debt counselling (same thing) It is specifically designed to get you out of debt, get rid of debt and once again have a good credit score.

Once I’ve cleared all my debt will you remove my name from the credit bureau?

YES, we will. The National Credit Act requires debt counsellors to issue a certificate to that effect and all credit bureaus and creditors are advised as well.

Can a debt counsellor help me if I had loans or credit agreements prior to 1 June 2007?

Yes! It is your financial situation TODAY that is taken into account.

Will creditors continue pursuing me for payments?

Your creditors shall, according to the National Credit Act, stop pursuing you when you’ve been placed under debt review.

They may contact you but they may not take legal action.

Let them know that we are your debt counsellors, you are under debt review and that we will be acting on your behalf. You should forward any letters to us to deal with it on your behalf.

When I have applied for debt review, will creditors continue pursuing me for payments?

Your creditors shall, according to the National Credit Act, stop pursuing you when you’ve been placed under debt review.

They may contact you but they may not take legal action.

Let them know that we are your debt counsellors, you are under debt review and that we will be acting on your behalf. You should forward any letters to us to deal with it on your behalf.

Can creditors refuse to accept lower payments under the debt counselling plan?

Creditors do not have to accept any offers of repayment below the contracted minimum.

However, it is our experience that they are prepared to accept reduced payment offers where we are able to demonstrate that the offer is reasonable and you are committed to repaying your debt through the debt counselling repayment program plan.

When I have applied for debt review, will my employer and work colleagues find out?

No, we never contact clients at work unless asked to do so. Your affairs will be dealt with in the strictest confidence.

When I have applied for debt review how long will it take for my situation to improve?

Immediately

You will benefit from a realistic budget which will allow your creditors to be paid at a rate that is affordable to you. The length of time it will take for your situation to improve will mainly depend on the total amount of your debt, and if and when you’re financial situation improves.

What do you mean by a pro-rata basis on a debt review proposal?

A pro-rata basis means that the creditor, to whom you make the largest monthly repayment, receives a larger portion of your total monthly payments.

Is debt review a loan?

No. This is a process in which your current debt liabilities are structured in such a way that you can afford to pay them back within your financial means.

Applying for debt review, does it make a difference if I own my home or not?

It will make no difference at all.

Can I apply for debt review if I already have judgments?

You can still contact us. Just please ensure we know your complete credit history and don’t leave anything out. It is essential that we know the full credit record from the start, as this can have serious repercussions with the credit providers.

Do I qualify for debt counselling if I am unemployed?

No, I am afraid this is not possible. However if you are married ‘in community of property’ and your partner works, then you will qualify as a joint application. It is, however, essential that you get employment as quickly as possible.

At which point do I become bound by decisions that you make as I am not willing to leave my entire life in someone else’s hands and I am especially concerned about my house. There are certain things I am not willing to do, so I would like to know if I have a say in things that happen?

We will ask you to approve our proposal before it is sent to any creditors and implemented, and the same goes for amendments. You are free to stop the process at any time up until your debt review application becomes a legal document.

Once it has become a legal document you are required to adhere to your approved repayment schedule. Regarding your house, you are not required to provide any collateral for debt review so as long as you maintain your repayment schedule, your house is safe from the bondholders.

Your company is based in Cape Town and Port Elizabeth, I am in Gauteng. How can this work?

You don’t need to see us personally. We correspond electronically (email, fax or telephone, we provide a Skype facility where we can discuss your situation “face to face “with you). Any document you need to sign can easily be sent to you via an overnight courier and returned to us the same way.

Once the process is completed will I still be listed at the credit bureaus for an amount of time or blacklisted?

Will it have a good or bad effect on any future credit I may apply for?

Your credit bureau profile will be flagged “under debt review”, and that is different from being blacklisted. This will prevent you from obtaining any further credit until all your debt is settled.

Only emergency loans are excluded. You will get a clearance certificate once all your debt is settled and you will be able to obtain credit again. Providing that you see the debt review program through in full, make all your payments, it will have no ill effect on your credit rating.

Debt review is completely different from being blacklisted. We personally feel it will be a plus as it will show you can manage debt responsibly and have been responsible for clearing all your debt and are serious about maintaining a clear credit history with the credit bureaus.

Once I have applied for debt counselling will I have money left for the day to day expenses? I don’t want to end up penny less.

We do take into account your day to day living expenses prior to determining how much is available to repay your credit providers and a full inventory is taken of your day to day living expenses so that you will be able to live while you are repaying all your debt.

What will happen if one year from now I find myself in a better financial position, will I be able to get out of debt review?

No. Payment arrangements must remain in place until all debt has been repaid in full. You can, however, amend your payment arrangements at any time in order to shorten your repayment period.

For example, you may increase your repayments, increase your deposits. To add to this should your improved situation mean you are in a position to repay all your debt, you may do so.

When your debt is completely paid up your debt counsellor must issue you a certificate stating all your debt is paid, you are debt-free and advise your creditors and the credit bureaus you are debt-free. You will then no longer be subject to the debt review agreement.

You can learn more about debt review removal here.

Are there any accounts that do not get included under debt review?

Only credit agreements as defined in the national credit act may be included in the debt review process. Accounts such as a doctor or dentist or cell phone accounts are excluded.

Also excluded are accounts in which legal action has been initiated prior to your application for debt review or where judgment or garnishee orders have been instituted.

With regard to doctors and cell phone accounts, these are not by definition credit agreements and in the normal course of events do not fall under the national credit act.

What happens to my accounts or credit cards once I have applied for debt review?

All your accounts will be frozen by your creditors. This includes your credit cards, overdraft facilities, revolving credit facilities, and instalment accounts.

You are required to continue to pay your accounts as best you can while your application is being processed. Once your debt review has been approved you may not use your credit cards (they should be cut up!) Should you use them, the protection afforded you under debt review falls away and your creditors may take legal action against you.

Why do I need a debt counsellor?

Debt counsellors were formally introduced by the National Credit Act (NCR) to help consumers who were having trouble with their debts. We will negotiate with your credit providers on your behalf and design a manageable debt repayment plan that you can afford so that you can take back control of your finances and avoid the excessive legal costs that may arise from creditors trying to recover money from you.

Now would be a good time to contact us.

You will get your hope back and a vision for the future.

Can I still go under debt review if I have been blacklisted by a creditor?

Yes, you can be placed under debt review at any time, provided a Debt Counsellor has declared you over-indebted and legal action has not yet commenced.

At what stage will my debt review listing be removed from the credit bureau?

The moment you are no longer in arrears and have paid off most debt excluding bonds, the Debt Counsellor can remove you from debt review and notify credit bureaus that you are no longer under debt review or over-indebted even though you may still have to pay off your bond. This is a sign that you are in a financially sound position.

Will I be blacklisted if I apply for debt review?

No, there is no blacklisting but if the Debt Counsellor finds the consumer to be over-indebted, they will add a flag to the consumer’s credit record to indicate to credit providers not to provide you with further credit because you are already over-indebted.

The flag will be removed once the debt has been repaid and when the consumer is no longer over-indebted.

Where can I find out more information about the National Credit Regulator and the National Credit Act?

You can read more about the National Credit Regulator (NCR) on their website & read here for more information about the National Credit Act

Will my name be listed at a credit bureau or be blacklisted if I have applied for debt counselling?

Yes, during the debt review period, your name will be listed with a credit bureau as being under debt review. Once the debt has been repaid the Debt Counsellor will issue a Clearance Certificate and instruct the relevant credit bureau to remove the debt counselling notation from your record.

This means that all records that you were under debt review will be removed. Once this process is completed you should be able to access responsible new debt if required.

What happens if a credit provider does not accept a repayment plan?

The credit provider will submit a counter-proposal and the Debt Counsellor will consult with you regarding an increased repayment amount. If this is not affordable, the Debt Counsellor will refer the matter to a Court for a decision.

There are risks involved, both financially and legally which your Debt Counsellor will explain, where applicable.

If I am under Administration, can I still apply for debt counselling?

Yes, you can rescind an Administration order. Although Administration is a separate legal process, the outcome may still be similar to that of the debt review process. In other words, you will still be required to pay your creditors all monies due and the money is paid through an Administrator.

The process may, however, take longer than if you are just under debt review. Remember that in order to qualify for Administration, your debt cannot exceed R50,000.

If I have additional cash while under debt review, can I pay the creditors directly?

All payment distributions must take place through a registered Payment Distribution Agency, such as the NPDA.

Arrangements for bulk or once-off payments can be arranged through your Debt Counsellor or debt counselling administration office. You must then contact your Debt Counsellor to make arrangements to restructure your repayment plan.

If I am under debt review, will I still be able to use accounts and credit facilities?

No, once notification has been given to your credit providers, your accounts will be flagged, indicating to credit providers not to provide you with further credit because you are over-indebted.

Once your debt has been paid in full and a Clearance Certificate is issued to you by your Debt Counsellor, the flag will be removed and you will be able to enter into new credit agreements.

If I am NOT over-indebted, can I still apply for debt review?

No, although you can still contact a Debt Counsellor for advice on how to manage your finances better. The Debt Counsellor will discuss various options with you.

What proof will I have that I am under debt review?

You will be issued with a letter to this effect from the Debt Counsellor.

When will I be under debt review?

Once you have successfully applied for debt review and the Debt Counsellor has notified your credit providers.

Can I consult a Debt Counsellor if I have received a Letter of Demand (Section 129 Notice)?

Yes, as a consumer you should visit a Debt Counsellor immediately if you have received a Letter of Demand. Debt Counsellors can negotiate arrangements on a Letter of Demand or Warrant of Execution, but if a court judgment has been taken they cannot include this debt under debt review.

Why can a Garnishee Order (Emolument Attachment Order) not be included under debt review?

It is already a Court Order and only a court can make a change to the Court Order. Consult with your Debt Counsellor for more information.

Can I apply for credit while under debt review with a Debt Counsellor?

Yes, provided it is for a consolidation loan to repay all your debts. Other than that no, because if you are under debt review you will be flagged on the credit bureau as such until a Clearance Certificate is issued.

What is the difference between debt counselling, administration and sequestration?

Debt counselling is where a Debt Counsellor develops a repayment plan that is affordable to the consumer and acceptable to the credit providers.

Administration is a legal process where the instalments are reduced, but credit providers only receive payment every three months and the term of repayment is much longer than that of being under debt counselling. Your debt must be less than R50,000 to qualify.

Sequestration is a legal process where assets are sold to try and lessen the debt and the court will appoint somebody to manage your finances. This is costly and you will be blacklisted for five years or until the court declares you as rehabilitated.

What happens if I’m married and I want to apply for debt review?

Married in Community of Property (COP): both spouse’s income and expenses have to be calculated in a joint application and both parties’ debt must be included.

Married out of COP: generally a single application for the over-indebted party will be drafted for debt review. However, a joint application for debt review can be submitted if both parties agree. In the latter instance, both parties will be placed under debt review and the statuses updated with a credit bureau.

Married Antenuptial Agreement: only the over-indebted spouse could apply for debt review although a joint application could be applied for if both parties agreed to this.

Traditional Marriage: the application for debt review will be seen the same as a couple married in COP.

Living together: a joint application can be applied for by both parties.

Must I continue to pay my accounts directly while I am still under debt review?

You will no longer pay your credit providers directly. If you are under debt review, the National Payment Distribution Agency (NPDA) collects the required funds from you and distributes the agreed monthly repayments to all your credit providers on your behalf.

Does debt review mean I get a payment holiday?

No, the debt review process does not provide you with payment holidays. You must still make monthly payments, as agreed with your accredited debt counsellor, from the first month you apply.

If you fail to make your monthly payments you are in default and the Debt Counsellor and/or the credit providers could terminate your debt review. This places you at risk as your credit providers can proceed with legal action.

Which debt can be included under debt review?

All secured lending such as property and vehicle finance can be included in the debt counselling application except where judgement has been obtained or a Letter of Demand (also known as a Section 129 Notice) has been issued.

Unsecured lending such as credit cards, store cards, and personal loans must also be included in the debt review application. Service agreements such as cell phone contracts, levies in arrears, electricity bills, pharmacy accounts, school fees etc are not included in the debt review process.

Your accredited Debt Counsellor can, however, negotiate with these creditors on any arrear amounts.

What are the benefits of debt counselling?

A Debt Counsellor will help alleviate your financial strain as they’re in a position to negotiate new debt restructure plans, repayment periods and even interest rates with credit providers.

Debt restructured repayment amounts are based on what funds you have only after your necessary expenses have been paid. This ensures that your debt repayments are, as far as possible, affordable for you and your family and acceptable to creditors. Debt counselling can provide you with the relevant skills and information necessary to avoid further accumulation of debts by focusing on credit card processes, money management, and the use of cash over credit.

Most importantly it provides you with an opportunity to regain control over your debt and your life, to look to the future with a better understanding of maintaining your financial wellbeing.

What is debt counselling?

Debt counselling is a professional service provided for over-indebted consumers. It is a process regulated by the new National Credit Act and provides you, the consumer, with greater protection against creditors threatening to take legal action.

Who can apply for debt counselling?

Consumers who are struggling to meet their monthly debt obligations qualify to apply for debt counselling. These consumers should have a distributable income, which will be used to offer reduced payments to their credit providers. Consumers married in community of property must jointly apply for debt counselling.

Who performs debt counselling?

Debt counselling services are offered by debt counsellors registered with the National Credit Regulator (NCR);

Prior to registration, debt counsellors have to successfully complete a debt counselling training course, satisfy prescribed education, experience or competency requirements and display the ability to manage their own finances.

Consumers can verify debt counsellors by checking their registration certificate which has the NCR logo and will indicate the debt counsellors details and registration number.

All registered debt counsellors should have a window decal (green sticker) at their premises and it should be visible;

Consumers can also verify registration of debt counsellors with the NCR.

Are there any fees for debt counselling?

Yes, there are debt counselling fees and legal fees applicable to debt counselling; The NCR debt counselling fee guideline is obtainable from this link FEE STRUCTURE alternatively by calling the National Credit Regulator contact centre on 0860 627 627

WHAT IS OVER-INDEBTEDNESS?

A Consumer is over-indebted if he/she cannot service his/her debts in a timely manner as agreed with credit providers.

The following are some of the indicators of over-indebtedness:

• You borrow money to pay other debts;
• You use your credit card and overdraft facilities to pay debts, buy food and other necessities;
• You skip payments on some accounts in order to pay others;
• You receive letters of demand and summonses from your credit providers and/or lawyers;
• You have judgments against you.

What are the implications for me if I decide to go under debt counselling?

We will conduct a detailed assessment of your situation to determine whether you are over-indebted or your expenditure exceeds your income. We will accept your application if you are over-indebted. If you are not over-indebted, your application will be rejected.

Upon acceptance, we will inform all credit bureaus and credit providers that you are under debt review. Your credit providers are required to verify all your account info e.g. outstanding balance, mortgage loan interest rates, monthly instalments, current balance type of contract e.g. business loan, credit card debts, hire purchase agreements, vehicle finance, etc.

Credit providers will no longer be able to pursue legal action against you for the duration of the debt review process, providing you keep your monthly repayment commitments up to date in terms of the new proposals.

Once we have completed the assessment, we will draft new debt repayment proposals for you.

Each individual proposal will be based on each individual’s circumstances and what you can afford to pay.

What happens when the debt review has been completed?

Before understanding what you are allowed to do once the debt counselling process has been completed, it is important to understand what happens during the process and why you are unable to take on additional credit while under debt counselling.

When a client signs up for debt counselling,

The Debt Counsellor will ensure that all credit bureaus and credit providers are notified that the client is now under debt review. The credit bureaus will then proceed by flagging the client’s profile on their system as ‘under debt review’.

This is done in order to ensure that the client is prevented from taking on more credit. The debt counselling process is implemented to rehabilitate the client’s financial situation and taking on additional credit will be detrimental to gaining their financial well-being.

However, once the client has paid off their debt, The Debt Counsellor will issue a clearance certificate to their creditors, as well as notify the National Credit Regulator (NCR) and the credit bureau via the NCR Debt Help system. Consequently, credit bureaus will be prompted to remove the ‘under debt review’ flag from the client’s profile, thus now allowing the client to take out credit.

Therefore, once you as our client have paid off all debt under debt review; you will be free to borrow credit again and will be allowed to purchase a house, car, etc.

It is, however, essential to make sure that once you have completed debt counselling and managed to sort out your financial situation that you do not rush into taking on more debt. Some people find the process of coming out of debt counselling slightly daunting as they are nervous of getting back into debt, whereas other people rush straight back into the credit process.

Trying to get by on a daily basis without incurring any additional debt can be tricky, especially with the rising cost of living. It is important that you stick to a monthly budget and constantly review it, as well as focusing on saving and investing in order to grow your money.

What is reckless lending?

According to us, an account will be considered as reckless if:

• The credit caused the client to become over-indebted;
• The credit provider did not do a proper assessment;
• The client did not understand the risks of the credit;

It is a complete defence for the credit provider to say that the client was dishonest.

Reckless lending can be identified by the following:

• The client’s net income is less than their debt obligations per credit report
• No recent change of circumstance or accounts taken out afterward
• No fraudulent activity by the client

The credit agreement will have to have been entered into after the 1st June 2007, and the information on the agreement would have to be correct at the time of application so that the information you have given to the credit provider is truthful. If the credit agreement is reckless then we would recommend taking this to court and the magistrate would be able to make a judgment on the matter.

Reckless lending does not apply to agreements before June 2007 or any of the following:

• A school loan or student loan;
• An emergency loan;
• A public interest credit agreement;
• A pawn transaction;
• An incidental credit agreement

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