How to Cancel Debt Review Before Being Declared Overindebted

This article explores the process of canceling debt review before being declared over indebted.

What is the Debt Review Process

Debt review is a formal process overseen by a registered debt counselor. It involves assessing your financial situation, negotiating with creditors to reduce monthly instalments, and creating a feasible debt repayment plan.

It is governed by the National Credit Act (NCA) in South Africa and aims to provide relief to overindebted consumers by restructuring their debt obligations into more manageable payments. When entering debt review, consumers are protected from legal action by creditors, and a debt counselor negotiates new repayment terms on their behalf.

Reasons for Cancelling Debt Review

There are various reasons why individuals may seek to cancel debt review before being declared overindebted. These reasons may include improved financial circumstances, the desire to access credit, or dissatisfaction with the debt review process. Whatever the motive, it’s essential to understand the steps involved in canceling debt review effectively.

How to Cancel Debt Review Before Being Declared Overindebted

The debt review application can be cancelled in terms of section (86)7(a) of the National Credit Act (NCA). This section allows the debt counsellor to reject the application within 5 days after the consumer has applied for debt review or debt counselling.

This section requires a debt counsellor to prove that the consumer is not over-indebted.

You can also cancel debt review by informing your debt counsellor that you no longer wish to proceed with your debt review application. This is usually allowed if you have not been declared over indebted.

Steps to be followed in order for section (86)7(a) to be successful.

• The consumer applies for debt review with a registered debt counsellor.
• The counsellor gathers information about their financial situation, including income, expenses, and existing credit agreements.
• The debt counsellor analyzes the information to determine the consumer’s current financial state.
• Crucially, if the assessment reveals the consumer is no longer over-indebted;

1. The debt counsellor will not proceed and confirm his acceptance and with a debt rearrangement proposal.
2. The debt counsellor will be required to issue a Form 17.2(Rejected), stating that the consumer is not over-indebted based on their current financial situation.
3. This Form 17.2(Rejected) is used to update the National Credit Regulator’s (NCR), the credit providers, credit bureaus and client.
4. The debt counsellor will then submit the following documents to the regulator in order for the regulator to update the NCR DHS with status code B. (See status code definitions below)

Documents to be sent by the debt counsellor to the NCR for update to Status Code B- Assessment has resulted in a rejection.

• Duly signed Form 16 (Application form);
• Clear record of when the consumer furnished all information and documents to the debt counsellor as per regulation 24(1)(b) of the National Credit Act(NCA);
• Affordability assessment showing consumer is not over-indebted; and
• Issued Form 17.2(a) served on the consumer and all credit providers.

The Credit Bureaus will remove the debt counselling flag on the consumer’s credit profile within a period of 3 working days from the date of receipt of the automatic update from DHS.

NCR DHS Status Code Definitions

• Status Code : A – Applied for debt counselling and being assessed
• Status Code : A1 – Voluntary withdrawal by consumer prior to being declared over-indebted
• Status Code : B – Assessment has resulted in a rejection
• Status Code : C – Assessment has resulted in a decision that the consumer is over-indebted
• Status Code : D3 – Formal debt re-structuring through the courts has commenced
• Status Code : D4 – Formal debt re-structuring is completed, and a court order granted
• Status Code : F – DC declares that the consumer is no longer over – indebted
• Status Code : F1 – All restructure have been settled except mortgage agreement
• Status Code : F2 – All restructure debts have been settled
• Status Code : G – Magistrate rescinded the debt review court order/consumer opposed debt review application and has been declared not over-indebted. (Option C on Form 17.W)
• Status Code : G1 – Application for debt review rejected by Magistrate – not over indebted. (Option D on Form 17.W)
• Status Code : I – Consumer deceased

Important Notes:

• The debt counselor has a responsibility to accurately assess the consumer’s financial situation and act accordingly.
• Issuing a Form 17.2(a) removes the consumer from the debt review program and signifies their improved financial standing.

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