Luke Hirst, of DebtBusters, a debt counselling organisation explains how the National Credit Act (NCA) brought in new rules and procedures to help the over-indebted tackle their financial problems.
If you think you are alone in your debt woes, think again, as more than 75,000 South Africans are taken to court by the credit providers every month. But, thanks to the introduction of regulated debt counsellors in June 2007, consumers are now able to go under debt review and avoid the large costs and stress of administration and insolvency.
1. Why use a NCR registered debt counsellor?
- They will assess an individual's finances and if the person is over-indebted they will be able to place them under debt review. During the debt review process, the credit providers cannot continue with any legal proceedings for up to 60 days, giving the consumer some breathing space.
- A debt counsellor will negotiate with your credit providers and will produce a debt restructuring plan that will be affordable.
- A good debt counsellor will look at your monthly budget and advise how savings can be made.
- They will check for any reckless lending by the credit providers
2. What advantages does the debt review have over debt administration?
- The debt review is much cheaper, meaning that your debt is paid off far quicker.
- You can avoid the expensive legal costs.
- Once you have paid off your debt obligations under the debt review and you have received your clearance certificate, your credit record is cleaned. With debt administration the black mark will stay on your record for several years, meaning that you cannot apply for car or home finance.
- Under debt review the debt counsellor is able to extend the term of the credit agreement and under certain circumstances able to reduce the interest rates.
3. Disadvantage of the debt review
- Once you have applied for the debt review you must not incur any further charges under a credit facility or enter into any further credit agreements. Failure to do so will result in you being rejected from the debt review and legal proceedings from your credit providers will begin.
4. What is the process?
- Consumer applies to go under debt review.
- Debt Counsellor advises all the credit bureaus and the consumer's credit providers.
- Credit providers verify the information and the debt counsellor assesses the consumer's situation and notifies the credit providers whether the consumer is over-indebted.
- Debt Counsellors will negotiate with the credit providers and draw up a debt restructuring plan.
- If the credit providers agree, a consent order will be drawn up. If no agreement is reached then a court application is made.
- The consumer makes one monthly payment according to the debt restructuring plan into the payment distribution agency which then pays the creditors.
- When all the debt obligations have been met, the debt counsellor will advise the credit bureaus and will issue a clearance certificate to the consumer.
- The credit bureaus will clear the consumer's credit record.
If you find that you are struggling with your debt repayments or are getting calls from the credit providers and their lawyers, then contact Debtbusters on 0861 663 328 (0861 NO DEBT) or click here to visit the DebtBusters website