Debt Counselling explained
Saturday, July 18th, 2009 Subscribe To Our Feed
Debt Counselling came into effect on 1 June 2007 with the introduction of the new National Credit Act or NCA.
Debt Counselling was introduced to provide a mechanism for solving the customer’s problem of being over indebt. Debt Review provides a conformable system of debt restructuring, enforcement and judgement, which places priority on the eventual satisfaction of all parties for the consumer commitments and oblications under the credit agreements.
The process of Debt Counselling (also referred to as Debt Review) was developed to offer a way out for consumers who cannot meet their monthly obligations under all credit agreements, after all basic living expenses have been paid.
Debt Counselling (Debt Review) can be summarised as a procedure where a person, who can no longer afford to meet all his monthly debt obligations, can apply with a debt counsellor to negotiate on his behalf with his creditors for reduced monthly repayments.
When a person applies for debt counselling, the debt counsellor will evaluate his financial position in order to determine if that person is *over-indebted, on the grounds of the information provided. The debt counsellor will notify the consumer’s creditors that he or she has truly applied for Debt Review. The consumer’s creditors are then not allowed to take any legal steps for a certain period of time. This depends on the outcome of the assessment. The assessment of evaluation can take up to 60 working days to complete.
Over-indebted means that the person does not have enough money left to meet his monthly obligations under all credit agreements, after all basic living expenses have been paid.
Should the debt counsellor determine that the applicant indeed appears to be over-indebted, he will commence with a procedure to inform all the person’s relevant creditors of his conclusion.
The debt counsellor will then, on behalf of the applicant, enter into a process of negotiation with these creditors in order to negotiate reduced (more affordable) monthly repayments on behalf of the applicant.
The debt counsellor is allowed to charge certain fees as approved by the National Credit Regulator (NCR). Debt Review fees will be deducted from the monthly amount paid to the Payment Distrubution Agency. So no out of pocket money needs to be found to pay for the cost of the Debt Review.
