Debt review in South Africa. The When, How and Why

Millions of South Africans grapple with unimaginable debt. You are not alone.

Financial and personal repercussions can be severe, leading to significant stress and uncertainty. However, South Africans who have engaged in the debt review process have a layer of protection that can prevent such dire outcomes.

Debt review, a process governed by the National Credit Act, is designed to assist individuals struggling with debt to manage their repayments more effectively. By restructuring debt and negotiating with creditors, debt review offers a legal safeguard against repossession and garnishment, allowing individuals to maintain their livelihoods and work towards financial stability without the constant threat of losing assets or a portion of their salary to creditors.

The Benefits of Debt Review 

The benefits of debt review are multifaceted, offering a comprehensive solution for individuals struggling with debt.

Protection Against Legal Action: Debt review protects your assets and puts a halt to creditors cutting into your earnings, ensuring your income remains intact for your essential needs.

Improved Cash Flow: Debt review consolidates your debts into a single, more manageable monthly payment.

Professional Support: Access to a professional debt counsellor who guides you through the process, teaching you how to budget and manage money better, so you regain control over your finances.

The History of Debt Review 

The history of debt review in South Africa begins with the National Credit Act (NCA) of 2007, aimed at protecting consumers from over-indebtedness and unethical lending. Debt review was introduced as a rehabilitation program to help consumers manage their debts by offering legal protection, restructuring debts, and negotiating with creditors for lower payments, ensuring ethical practices in lending and borrowing

It replaced the Usury Act and Credit Agreements Act, creating a more consumer-friendly credit market.

The Usury Act was considered limiting for consumers in South Africa because it didn’t adequately protect them from unethical lending practices. Before the National Credit Act (NCA) replaced it in 2007, consumers lacked the right to fully understand the terms and conditions of their credit agreements, often finding themselves at a disadvantage due to complex jargon used by creditors. The NCA aimed to create a more transparent, fair, and accessible credit market, offering protections such as preventing over-indebtedness and ensuring fair treatment in the credit industry

Today, debt review stands as a vital tool in the South African financial landscape with over 3.5 million individuals having sought its assistance, finding relief from overwhelming debt burdens.

How Does the Debt Review Process Work? 

The debt review process in South Africa can be broken down into five main steps:

  1. Application: You apply for debt review through a registered debt counsellor.
  2. Assessment: The debt counsellor assesses your financial situation to determine over-indebtedness.
  3. Negotiation: The counsellor negotiates with your creditors to restructure your debt, aiming for reduced payments and interest rates.
  4. Payment Plan: A restructured payment plan is implemented, consolidating your debts into a single monthly payment managed by a Payment Distribution Agency.
  5. Clearance: Upon successful completion of the payment plan, you receive a clearance certificate, and your credit profile is updated to reflect that you are no longer under debt review.

Are You Eligible for Debt Review?

To be eligible for debt review in South Africa, you must be over-indebted, meaning your essential expenses exceed your income, making it challenging to keep up with debt repayments. You also need an income to support a restructured payment plan.

Other requirements include being 18 years or older, a bank account, and being a South African citizen or having debt in South Africa. If married in community of property, both partners must apply for debt review. You cannot be under debt administration, sequestrated, or have been handed over to an attorney

How to Get a Free Assessment for Debt Review

If you’re struggling with your finances and debt repayments, it’s worth considering a free debt review assessment. This step can help you understand your financial situation better and explore options for managing your debt more effectively. A debt counsellor can provide personalised advice and support, helping you on your path to financial stability. Don’t hesitate to reach out for this valuable assistance.

Contact us for a free assessment today.

 

 

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