Read what people really want to know about debt review and how it affects you.
What are the benefits / advantages to debt counselling?
Sequestration and administration would be alternative options for over-indebted consumers. Both of which is non beneficial to client as it is very expensive, client can lose all assets and have a tarnished credit record for as long as 9 years. A benefit of Debt Counselling is that your assets are protected for as long as you under debt review. Therefore this route of managing your finances and getting you back on track would be most beneficial for an over-indebted consumer.
What is Debt Review?
Debt review is where you are able to pay one affordable amount each month to a National Payment Distributing agency who will then distribute your money according to the debt restructure plan set out by our accredited software. All your assets will be protected whilst you being under review, meaning that no further legal action can be taken against you.
Why can’t I restructure my own debt repayments?
You can by all means do your own restructuring, however as registered debt counsellors we have been trained to help you deal with difficult credit providers. We deal with your debts in an unbiased way, as our main focus is to get you out of debt as soon as possible. We have built strong relationships with the creditors to know what they will reasonably accept and what they will not consider. One of the great things about debt counselling is that we negotiate a more affordable interest rate on your behalf. On average we negotiate interest rates for as low as 3 %, resulting in saving you thousands in interest charges on your credit agreements.
What is Debt Counselling?
Debt counselling is a process of assisting consumers that are experiencing debt related problems through:-
- Budget advice;
- Restructuring their payments;
- Negotiating with credit providers on their behalf, and
- Monitoring their payments while
- Providing after-care services
Debt counselling is done by a debt counsellor. This is someone who is registered with the National Credit Regulator (NCR) and who assists consumers who are experiencing debt-related problems and are having difficulty making their current monthly payments by providing them with budget advice support and mediation with credit providers.
How do you know you need a debt counsellor?
When you are suffering under the yoke of over-indebtedness, then you need a debt counsellor.
A consumer is considered to be over-indebted if the money available after payment of essential expenses is not enough to pay all other debts. Herewith some indicators of over-indebtedness:-
A consumer is over-indebted when he/she cannot service all his/her debts in a timely manner as agreed in the credit agreements. The following are indicators of over-indebtedness:-
- You use your credit card and overdraft facilities to pay debts and buy food and other necessities;
- You borrow money to pay other debts;
- You skip payments on some accounts in order to pay others because you cannot keep up;
- You cannot pay your bills at the end of the month;
- You receive letters and summonses from creditors and/or lawyers;
- You are considering being placed under administration;
You have judgments granted against you.
How does one avoid becoming over-indebted?
Avoid getting more debt, rather downgrade and change your lifestyle! It is important to remember that a change in lifestyle is the first step in creating a better environment for ourselves as consumers in these challenging times. You will need to cut some things and/or make adjustments in order to stay afloat.
Things you need to cut/adjust are:
- Tobacco / cigarettes
- Club membership
- Pay/Satellite TV
- Holiday clubs
- Where possible use public transport
You will find that by cutting these items out of your budget, you have more cash. You then have the option to either save that money or pay more on your account and therefore reducing your monthly debts.
How does the Debt Counsellor collect their payments / fees?
At Debt Check we collect all fees via a registered Payment Distributing Agency (PDA). The PDA would debit your account each month with one installment, and distribute funds to all creditors and the Debt Counsellor. Our fees are regulated by the National Credit Regulator (NCR). The stipulated amount for Debt Counselling fees works as follows:
- An Application fee of R 100
- A Restructuring fee equal to the first installment of the debt re-arrangement plan with a maximum of R 6 000
- A monthly After-care fee of 5% of the monthly installment of the debt re-arrangement plan with a maximum of R400 for a period of 24 months. Thereafter 3% with a maximum of R400 for the remaining period.
- Should the consumer withdraw from the Debt Review Process after a certain stage a fee equal to 75% of the restructuring fee will be payable by the consumer.
- A legal fee of R 750 in the 2nd month for the debt counsellor to obtain a consent order when all credit providers consented to the debt re-arrangement.
How does Debt Review protect me?
When you apply for debt review, your most valued assets are protected under your Debt Review application. A creditor cannot issue you with legal notices once you’ve applied for Debt Review. Within 60 days we should get acceptances or counter proposal from your credit providers, as long as we continue paying the agreed installment each month your asset/s will be protected. Creditor will only start the legal process should the consumer default on his re-arranged installment.
What happens if my accounts already have legal action?
If your accounts are already far into the legal process, this account cannot be included under the debt review process and will not offer you any protection for that specific creditor. We can however, try to negotiate with the attorney for a reasonable installment. However please note that the creditor / attorney is not obliged to accept any proposal we send them as legal action has already commenced.
Does it mean I’m declared insolvent if I apply for Debt Review?
No, once you apply for Debt Review we would flag your name with all Credit Bureaus to say that you cannot get any further credit while your accounts are being restructured through the Debt Review process. However once your debts are settled, we will lift this flag by means of issuing you with a Clearance Certificate. Therefore once you have applied for Debt Review it is not an act of insolvency as opposed to applying for Sequestration / Administration. Your name is not blacklisted, there is merely an indication to all creditors that you have applied and they should not give you further credit while we trying to settle your existing debt.
Payment allocations and how it works?
We firstly look at paying your secured assets like your bond and vehicle. We first satisfy your secured assets by ensuring there is enough monies to cover interest and bring down the capital amount. The remaining unsecured debt we look at settling within a 5 year period in a pro-rata fashion. We also reduce your interest rates to a low average of +/- 3 % on most of your credit agreements.
What is an administration order?
In the event that you find yourself unable to manage your debt and should your debt not exceed R50 000, you can apply for an administration order in the Magistrates Court. The magistrate examines your financial position and appoints an administrator to whom you make regular payments.
These payments are divided proportionately among the various creditors you owe money. An administration order remains on your credit report for a period of 10 years or until it has been rescinded.
What is a judgment?
A judgment is granted when a court orders that you make payment on your debt. A legal process is followed before a judgment is issued. A summons is issued to the individual (note that legally the summons does not have to be issued to the individual in person, but can be issued to the individual’s home address). The summons informs you of the court appearance and allows you to represent yourself. If you fail to appear in court, the judgment is issued. The judgment is held on the credit bureau system for five years or until paid in full.
What is a rescinded judgment?
When a judgment has been granted against an individual in error, or when other irregularities have occurred, or if the credit/service provider agrees to the rescission, judgment could be rescinded and removed from the consumer’s credit report.
What is default data?
Default data is information supplied to a credit bureau by the credit grantors that relates to late payment or non-payment on accounts. Different retention periods apply for different types of defaults.
Classifications such as ‘delinquent’, ‘default’, ‘slow paying’, ‘absconded’ or ‘not contactable’ are recorded on your credit report for 1 year.
Classifications related to enforcement action taken by the credit provider, including classifications such as handed over for collection or recovery, legal action, or write-off are recorded on your credit report for 2 years.
What are legal notices?
A notice is a legal action that has been taken against you after you have failed to pay a debt or outstanding account. Notices include administration orders, provisional sequestrations, sequestrations and rehabilitation orders. Administration orders remain on your profile for 10 years, rehabilitation orders remain for 5 years and sequestrations remain for 5 years if no rehabilitation order is granted.