What does it mean to be under debt review?

What is Debt Review?

Debt review or else known as debt counseling is a way for people to repay their outstanding debt through an affordable payment plan that is agreed with creditors. It’s a highly regulated, legally protected process that helps consumers get back on their feet. Through the debt review process, a registered debt counselor negotiates with your creditors to reduce your monthly repayment commitments, easing your cash flow and giving you some breathing room.

Through the debt review process, a registered debt counselor negotiates with your creditors to reduce your monthly repayment commitments, easing your cash flow and giving you some breathing room.

Is debt review something that I should consider?

If you are struggling to pay your debts on time or are feeling distressed about your financial situation, you could benefit from debt review.

Debt review is a legal process anyone can make use of if you are over-indebted – that is, if you cannot meet all your financial commitments.

What should I know before signing up for debt review?

  • It’s a legal process that officially places you under debt review.
  • You cannot get access to any other credit while you are under debt review – so you can’t apply for credit.
  • Your credit isn’t written off. You simply reduce your payments to help you get back on your feet – so you will have to pay your bills in full.
  • If you don’t make your new restructured repayments, your creditors can take legal action. However, the plan that your debt counselor helps negotiate for you with the aim that legal action does not happen.

Who can apply for debt review?

Anybody who is struggling to pay their debt and has a source of income can apply! If you feel like you need help – take the first step to a debt-free future – contact us.

Just take note!

If you are married in a community of property, you and your spouse are jointly liable for debt, regardless of whose name it is under, and you would need to apply jointly.

If you are married out of community of property (with an antenuptial agreement) then you are responsible for only your own debt and your spouse does not need to apply, although they can choose to do so.

What about my house and car?

There’s no need to worry! Bond and vehicle repayments can be included, so you don’t risk your home or car being repossessed during the process as long as you pay your monthly reduced instalment as agreed to by credit providers. This is very important!

For the term of your debt review, bond repayments, interest and payment amounts are reduced. However, once the debt review process is completed, the interest and repayment amounts revert to the original contractual values.

How do the repayments work and what does it cost?

Okay, so stay with us, because this can get tricky. You will make one affordable payment each month (the amount is based on what you can afford each month). This is paid to an independent Payment Distribution Agency (PDA) – overseen by the National Credit Regulator – which distributes money on your behalf to the creditors included in the debt counseling plan.

So… One payment and the PDA takes care of the rest! Debt counselling is highly regulated, and all the fees are included in the single payment. The National Credit Regulator sets the fee guidelines.

How long does the debt review process take?

It usually lasts between three and five years, depending on the amount of debt, the arrangements the debt counselor negotiates, and what you can afford to pay each month. So it is dependent on a few factors.

The great part is, all reputable debt counselors have a client-service team available throughout the process to offer advice, support, and communicate with creditors. You are not in this alone!

Can I still apply for credit while under debt counseling?

No…

The main purpose of debt review is to become debt-free. Only once you have completed the programme and receive a clearance certificate, can you re-enter the credit market.

But, if you think about it, it’s kind of counterproductive to apply for more credit when you are trying to get rid of it, right?

I’ve successfully completed debt counseling – how long after debt review can you get credit?

This is the process that your debt counsellor will follow once all of your accounts have been paid off:

When you have paid up all your accounts – except your home loan, which must be up to date – a reputable debt counselor will use the paid-up letters from creditors to create a clearance certificate. This, along with the paid-up letters, is then sent to all the major credit bureaus. The debt counselor then updates your debt-review status to ‘clearance’ on the National Credit Regulator’s Debt Help System. Once these steps are completed, you will no longer be listed as being under debt counseling and will be eligible to access new credit.

The do’s and don’ts of debt counseling

Do’s:

Learn to save money! 

This is crucial in the process. A good way of doing this is using a Spending Tracker app. This is a great way of seeing where you can cut some unnecessary spending, and in the end, put some money back in your pocket.

Don’ts

Don’t skip any payments!! 

By doing this, you put your debt review process under risk and can lead to your creditors cancelling the debt review agreement.

What then? Then you are left open and exposed to your creditors, who then can take action against you.Debt review is your protection, and you can lose it.

Don’t even try to make new debt

The debt review process is designed to get you OUT of debt and not INTO debt for your own benefit. New creditors will do an ITC check. This will result in a worsened credit score. You will also not be able to follow through on your agreed monthly payment. Making the wrong decisions now would affect your entire process of becoming debt free.

So…

Now that you know more about the debt review process, do you think that you need help?

We want to impress upon you that if you feel like you have a problem now, it might only get worse in the future and then you might be forced to apply for sequestration.

If you need help, feel free to contact us! We strive to make this difficult situation better for our clients in every possible way.

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