Your debt worries keeping you awake at night? You are not alone.
There are 22.5 million credit active consumers in South Africa, of which just under half have impaired credit records, which means they are in arrears with their accounts by 3 or more months. Understanding debt counselling and how it works can help you take control of your financial situation.
Here is all you need to know about debt counselling and how it can help you.
What is Debt Counselling?
Debt Counselling is a remedy that is best suited to consumers who are over-indebted and struggling to make regular monthly payments towards their debts.
- Debt Counselling is a formal and structured process which is regulated by the National Credit Act.
- It is a legal process, whereby your debt counsellor will renegotiate your debt repayment terms with your credit providers, strip out fees and reduce your interest rates.
- You will make one fixed monthly debt repayment over a longer term (60 months)
- Under debt counselling you will be legally protected throughout the process
Who can apply for debt counselling?
- To qualify for debt counselling, you will need to be classified as being over-indebted, by a registered debt counsellor, as defined by the NCA
- Being over-indebted means that you are unable to make your monthly repayments on time
Should your spouse apply with you?
If you are married in community of property:
- You and your spouse must make a joint application
- This means that your spouse will be under debt counselling as well
- The law sees your debt as a single entity and requires both parties to enter the process
If you are married with an ante-nuptial contract:
- You may make a single application
- The process will only apply to you and will only include your debt
- If your assets are jointly owned, you will need to disclose this information when applying
Will your credit report be affected?
- Your credit report will indicate that you are under debt counselling
- All history of debt counselling will be removed after you have been issued your clearance certificate
- If your application is cancelled or terminated, this will be indicated on your credit report for 6-12 months
Can you exit debt counselling before all your debt is paid up?
Debt counselling is a remedial financial solution with the aim of getting you debt free and in a position of financial security.
You can exit debt counselling when:
- All your debt has been repaid
- A clearance certificate has been issued
- Before the completion of the over-indebtedness assessment
Your debt counselling process can be cancelled/terminated by your credit providers if:
- You fail to make payments as per your new payment plan
- You will still be considered as being under debt counselling
Your debt counselling process can be withdrawn by your debt counsellor if:
- Your monthly instalment is too low to be accepted by your creditors
- You do not fully disclose all your financial information or adhere to reasonable requests
Can you access more debt when under debt counselling?
The purpose of debt counselling is to get you debt free and therefore you will not have access to your credit cards, retail accounts, overdrafts or any types of debt while under debt counselling.
Can you skip payments to your credit providers at any time?
- Skipping payments can result in termination of your debt counselling process by your credit provider or debt counsellor.
- Cancellation would require you to go back to your original instalments prior to debt counselling
Can you pay more than the amount on your payment plan?
- The more you pay, the quicker your debts will be repaid and you are encouraged to pay extra money
Can you exclude some accounts from debt counselling?
- If you have received a lawyer’s letter (letter of demand or Summons) for any of your accounts, it may be excluded from debt counselling.
- You will need to make arrangements with your credit provider to pay off the excluded account/s
Why should you cancel your debit orders that pay your debt?
It is important to cancel debit orders so that:
- Credit providers do not continue deducting your original payments every month
- This will only apply to accounts which have been included under debt counselling
Why should your salary be paid into a savings account?
- If you are in arrears with your bank and once your salary is paid into your account, “money grabs” may occur.
- This is when your bank deducts money from you in order to settle any outstanding payment.
- For this reason, it is best to have your salary moved to a savings account, where you can manage your payments and remain in control.
Should you continue paying your full insurance premiums?
Often, vehicle and homes needs to be insured and forms part of your loan contract. It is important that you:
- Continue paying all insurance policies whilst under debt counselling
- This includes all rates, taxes and maintenance plans for vehicles
What happens when the Court considers your final proposal?
- The Court will consider your application and make sure it is in line with the NCA.
- Once the Court Order has been set down, your credit providers must accept the new payment plan
- You cannot miss any payments as your credit provider can repossess your assets or take legal action against you
How long does the Debt Counselling process take?
- Your new payment plan and Court date should be finalised within 60 working days since your application date.
- The debt counselling process will take approximately 5 years, depending on whether you have assets or not.
If you are in need of financial assistance, DebtBusters’ expert consultants are just a phone call away to help you through the debt counselling process and get you on the path to becoming debt free.
Call 0869 99 06 06 to speak to a DebtBusters consultant today. Alternatively, you can fill out our free call back form on our website www.debtbusters.co.za.