The debt review process offers legal protection to over-indebted individuals when they enter the debt review process. This protection is provided under the National Credit Act (NCA) and is intended to protect consumers from harassment and unfair debt collection practices.
Once an individual enters the debt review process, their creditors are legally required to stop all debt collection efforts, including phone calls, letters, and legal action. This protection remains in place for the duration of the debt review process, which typically lasts between three to five years, depending on the individual’s circumstances.
During this time, the individual will make one affordable monthly payment to a Payment Distribution Agency (PDA), which will distribute the funds to their creditors according to the negotiated repayment plan. This payment is often lower than the individual’s original debt repayments, making it more manageable for them to keep up with their financial obligations.
If a creditor wishes to take legal action against the individual during the debt review process, they must first obtain permission from the court. The court will only grant permission if the creditor can prove that the individual is not adhering to the repayment plan or if they have a valid reason for taking legal action.
Debt review provides a level of legal protection to over-indebted consumers, ensuring that they are not unfairly harassed or subjected to unfair debt collection practices by their creditors. It also gives them time to get their finances back on track and repay their debts in a manageable way.