Debt counseling, according to Paul Slot, president of the Debt Counsellors’ Association of South Africa (DCASA), is not for those who do not have a source of income or who will not be able to return their obligations within a reasonable time frame. 2. It will come at a cost to you. The bad news for consumers who are deeply in debt is that debt counseling is not provided at no cost.
Generally speaking, statutory debt counseling is intended to give over-indebted customers with an alternative to the standard debt collection remedies of administration and sequestration. Both administration and sequestration have their own set of negative aspects.
This article was initially published in the Personal Finance magazine’s third-quarter 2013 issue, and it has since been updated. The National Credit Act (NCA) of 2007 mandated the establishment of debt counseling services.
Debt review, sometimes known as debt counseling, is a method of repaying existing debt by establishing an affordable payment plan with creditors that is mutually acceptable to both parties. There are strict regulations and legal protections in place to assist customers in getting back on their feet.
In a nutshell, Debt Review is the process of transferring your debt negotiations to a Debt Counsellor, who will act as your point of contact throughout the process, compile your debts, examine your income, and together with you, devise a payment plan with creditors based on your instalments and interest options; and then your go-to Debt Counsellor will handle the rest.
It is expensive to seek debt counseling, as it involves paying an upfront charge as well as regular payments to the debt counsellor, as well as increased interest rates if your payment terms are prolonged.
Following your initial examination with a debt counseling organization, you may be notified that your current financial status does not qualify you to participate in a debt review program. Some of your accounts, particularly those that have been the subject of legal action, may be barred from participating. It is possible that your debt will take longer to pay off.
South Africa has a number of distinct laws that establish prescription durations. For example, the Prescription Act states that contractual and delictual obligations are extinguished three years after the day on which they became due (due). The duration of prescription durations may be extended or shortened in specific conditions.
Once you’ve been unflagged, you’ll be able to apply for credit again and make purchases on credit, such as buying a house or a car. You will not be refused because you have already been subjected to a debt review. You will, however, need to work on improving your credit score, just like everyone else who wants to apply for credit.
When a judgment is entered against you, you are not subject to imprisonment for failing to pay your obligations. The alternative is that you can be liquidated or sequestrated, have an emoluments attachment order imposed on your pay, or have your assets seized.
The length of time it takes to complete the debt review process is determined by a variety of factors, including the amount of debt you owe and how much you can afford to repay, among others. To finish the procedure, be certified debt-free, and receive your clearing certificate, it typically takes 36 to 60 months.
Being enrolled in debt counseling will not have a negative influence on your credit score; in fact, it may have a good effect on it. Because you will be protected by the National Credit Act while you are receiving debt counseling, the credit bureaus will not be able to report any further bad information about you to them about your credit history.
We can certainly state that debt review is a smart option if you are overextended in your financial obligations. Debt review might be beneficial as long as you have a source of income and can demonstrate that you are unable to make your monthly responsibilities.
The debt counselor will work with your creditors to renegotiate interest rates and repayment conditions in order to lower your monthly payments. It is advantageous to get your debt reviewed since it might prevent your possessions from being seized by your credit provider.
Is that even possible? Is it possible to do this if your debt review was made into a court order and the court order is later overturned? If an application is made to the court to have you declared ″not over-indebted,″ is it possible to do so?
Consumers should be aware that debt counseling is not a savings plan, according to the Federal Trade Commission. Avert advertisements on social media that claim to lower your debt repayments by up to 60% and provide ″loan-free debt relief″ should be avoided. Offers of debt relief should be viewed with extreme caution.
To end the debt review process and have the debt review notice removed from your credit reports, you must file a court application with the court requesting that the court determine that you are not over-indebted, even if there is no court order in place for your debt review at the time of your application.