What exactly is debt review?
Over-indebted consumers apply for debt review and are assigned a debt counsellor to evaluate their outstanding debt. A repayment plan is developed for each individual consumer that allows the consumer to cover living expenses and settle their accounts with their debtors. In simple terms: they see how much you owe, how much you earn, how much you need to keep the boat afloat from one month to the next and then create a workable payment plan on your behalf.
The Pros of Debt Review
When you apply for debt review, you are assigned an NCR-registered debt counsellor who is in charge of giving you budget advice and restructuring your debts. An important part of restructuring your debt is the negotiations with your credit providers to lower your instalments. The goal is to reduce your debt to manageble levels and improve your overall financial situation. Your debt counsellor – DC – will be monitoring your payments to your credit providers. Hopefully the financial education you receive during the process will prevent you from falling into the same trap in the future.
Because you are able to pay off your debts over a longer period, you will be able to meet monthly obligations like rent, electricity, water, school fees, groceries and other essentials. Your living expenses are taken care of first, then the debt. Your debt counsellor will also work with you to find ways of cutting costs and saving money.
Once you are under debt review, the court order protects you. Your assets cannot be repossessed by a credit provider and your creditors may not harass you any longer with phone calls demanding payment. Once you have completed the process – you have finished paying all your debt (excluding your bond), there will be no permanent record of debt review on your credit record.
The Cons of Debt Review
No more credit (for a while)
To ensure that debt review clients are able to get back on the road to financial prosperity, they are not allowed to take on any more credit while they are under debt review. The only way to exit the process is to either pay off all your debts or to get the debt review court order rescinded.
Counselling is not free but are not high either and are set by law. Fees are incorporated in the scheduled monthly payments the consumer makes to the debt counsellor. An initial, once-off application and administration fee of R350.00 may be charged at the discretion of your debt counsellor.
Not everything is covered
There are certain kinds of debt that cannot be included under debt review. This includes existing garnishee orders, judgements and default listings. Informal loan arrangements with family and friends, telephone accounts and incidental debts to care providers such as doctors are also not covered.
There you have it – the pros and cons of debt review in South Africa in 2018. If you have any further questions pertaining to the debt review process and how it will affect your financial wellbeing, please don’t hesitate to get in touch with a Libertine Consultant representative.
We are here to make the entire process as understandable and hassle-free as possible!