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 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 (as long as you are paying).

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 to a low 3 % p.a., resulting in saving you thousands of your hard-earned money in interest charges.

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.
You considered to be over-indebted, if the money you have available after paying all your essential expenses is not enough to pay all your debt obligations in full each month.

Some indicators of over-indebtedness:-

  • You use your credit card and overdraft facilities to pay your monthly debt obligations, buy food and transport etc. Credit Cards and overdrafts is to be used for emergency purchases, not your day to day living expenses.
  • You borrow money to pay other debt obligations.
  • 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 lawyers.
  • You are considering sequestration.
  • 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 yourself as a consumer in these challenging times.

You will need to cut on some things and make adjustments in order to stay afloat.
A small list of things you need to cut or adjust:

  • Alcohol
  • Cigarettes
  • Entertainment
  • Club membership
  • DSTV
  • Holiday clubs
  • Gambling
  • Where possible use public transport

You will find that by cutting these items out of your budget, you would increase your monthly cashflow.  You then have the option to either save the extra money or pay more on your accounts.

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 instalment and distribute funds to all creditors as stipulated in the repayment plan.  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 350.
  • A Restructuring fee equal to the first instalment of the debt re-arrangement plan with a maximum of R 8 000.
  • A monthly After-care fee of 5% of the monthly instalment of the debt re-arrangement plan with a maximum of R450.
  • A legal fee of R 1 100 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 instalment each month your asset/s will be protected.  Creditors will only start the legal process in two instances; 1) there is no agreement in place yet, or 2) you defaulted on the agreed 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 will, however try to negotiate with the attorney for a reasonable instalment.  The creditor or 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 will “flag” your name with all Credit Bureau’s with an indicator that you cannot get any further credit while your accounts are being restructured through the Debt Review process.  Once your debt obligations are settled, we will lift this flag by means of issuing you with a Clearance Certificate.  It is for this reason, that once you applied for Debt Review it is not an act of insolvency as opposed to applying for Sequestration or Administration.  Your name is not blacklisted, there is merely an indication to all creditors that you’ve applied and they should not give you further credit while we trying to settle your existing debt.

Payment allocations and how it works?

Firstly, we look at paying your secured assets like your bond and vehicle.  The remaining unsecured debt obligations must be settled within a 5-year period. We also reduce your interest rates to a low average of 3 % p.a. 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 at 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 granted. A summons is issued to the individual, which informs you of the court date and allows you to represent yourself. Should you fail to appear in court, the judgment may be granted against you. The judgment is held on the credit bureau system for thirty 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 or service provider agrees to the rescission (generally when the account has been fully paid up), 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?

The beginning of the legal notice process starts with a section 129.  The process happens after numerous attempts by the creditor to arrange a payment plan with you.  After many failed attempts, the creditor may issue you with a Sec 129.  This then gives you 10 days to get in touch with a Debt Counsellor to negotiate a repayment plan with your creditors before issuing Summons to you.