Debt review, otherwise known as debt counselling, is a debt solution implemented by the National Credit Act 34 of 2005 which targets South African consumers who are over indebted and struggling to manage their debt repayments. Debt review is the process whereby a debt counsellor assesses a client’s outstanding debt and implements a restructured debt repayment plan to allow consumers to be able to pay back their debt at a rate they can afford, while having money to cater for their living expenses.
Debt review is a binding agreement that is made into a court order by your debt counsellor. The Debt Counsellor acts on behalf of a consumer to reach an agreement between the consumer and the creditor. The Consumer’s debt is assessed by a Debt Counsellor based on the information given by the consumer. The process starts with a signed application by the consumer, giving consent to a Debt Counsellor, to act on their behalf and successfully reach an acceptable agreement between the credit providers. On receipt of a signed application, the Debt Counsellor informs all creditors and credit bureaus of the consumer’s application. The Credit Providers send out a COB (Certificate of balance) in order to start negotiations. A proposal which is basically a payment plan is then drawn up by the Debt Counsellor and sent to all creditors providers. After the proposal is accepted by the creditor providers, the file is then prepared for court. The court order is to protect the client from legal action and also to finalise the payment plan with the credit providers to make the reduced instalments binding on both parties. This means the credit providers cannot claim more money from the consumer. It’s nothing to be afraid of, the court order is there to protect the consumer. Once the accounts are all paid up, the court order falls away.
While it is believed that being listed as under debt review on the credit bureau and not being able to take out credit for the duration of the plan is the down side to debt review, many people don’t realise that they won’t be able to take out further credit in any event because they are over-indebted. Credit providers have to do an affordability assessment when providing credit. If the client is over-indebted they will not legally be allowed to provide the client with credit. This will be reckless credit which is illegal. Missing payments and being in arrears also reduced your chances of getting further credit. If you want to be debt free, taking further debt won’t help achieve that. Debt review on the other hand allows you to focus on paying off your debt instead of using credit to survive. Once you pay off your debt under debt review, you will be issued with a clearance certificate and the credit bureaus will be updated. You will no longer be listed under debt review and will have a clear credit record