What happens after you sign up for debt review?

Are you feeling uncertain about the debt review process? Does the thought of applying make you nervous about what lies ahead? It’s completely normal to feel apprehensive, especially if you’re unfamiliar with this process.

We are committed to providing you with all the information you need to make an informed decision. By understanding the steps involved in applying for debt review, you can better assess whether this process can help improve your current financial situation. 

Here’s what you can expect when applying for debt review, and why it might be a beneficial step for you:

1. Initial Application

The journey to financial recovery begins when you reach out for help, by directly contacting a debt counsellor . You initiate the process by submitting crucial financial details including your income, expenses, and all outstanding debts.

When making an application to your debt counsellor, they will first need to assess your current financial situation with a no cost obligation free assessment in 3 steps:

1. Firstly, your debt counsellor will review your current debts and your affordability. This is vital to conduct a comprehensive assessment of your financial status.
2. Your debt counsellor will then use this information to determine if you are indeed over-indebted and thus eligible for debt review, according to the National Credit Act (NCA) guidelines.
3. The final step involves calculating your reduced consolidated repayment amount towards your creditors. 

2. Legal Protection

After you’ve completed the assessment, you can decide whether you would like to enter the debt review process. Once you enter the process you will be given immediate  legal protection from creditors under the National Credit Act (NCA). This protection is critical as it prevents creditors from initiating or continuing any legal actions against you related to debt recovery.

• Creditor Notification: As soon as you enter the debt review process, your debt counsellor notifies all your creditors of your debt review status. This is your first step toward financial stability, signalling to your creditors that you are taking proactive steps to manage your obligations.
• Communication Channels: Importantly, the process also shifts all communications with your creditors to your debt counsellor. This shift is significant as it effectively stops any direct harassment from creditors. Instead of dealing with multiple calls or letters, your debt counsellor acts as the intermediary, allowing you to focus on your financial rehabilitation without the added stress of constant creditor contact.

3. The 60 Day Period 

After your creditors have been notified of your debt review status, a crucial 60-day period commences. During this time, creditors are legally barred from initiating or continuing any legal actions against you. This  is essential as it provides a breathing space for you and your debt counsellor to work on a viable financial solution without the threat of legal proceedings.

• Negotiation Preparation: The 60-day window is not merely a pause but a productive phase. Your debt counsellor uses this time to thoroughly review your financial situation and engage with your creditors. The goal here is to develop a detailed proposal for a new repayment plan that aligns with your current financial capabilities. This involves negotiating interest rates, payment amounts, and timelines that are realistic and sustainable based on your income and essential living expenses.
• Creditor Feedback and Adjustments: Throughout the 60-day period, your debt counsellor will receive and incorporate feedback from the creditors on the proposed repayment plan. This is a dynamic process where adjustments may be made to accommodate specific concerns from creditors while still ensuring that the plan remains feasible for you. This collaborative approach aims to prevent future financial distress and help you return to a state of financial stability more quickly.

4. Negotiation and Court Involvement 

This critical phase of the debt review process involves intense negotiation between your debt counsellor and your creditors to construct a new, more manageable repayment plan. This plan may include reduced payments, extended terms, or lowered interest rates, depending on your financial situation and the creditors’ willingness to accommodate changes.

• Reaching an Agreement: If the creditors agree to the proposed terms, the next step is to formalise this new repayment plan. This formalisation is achieved through a restructured payment agreement, which legally binds both you and the creditors to the new terms. Once signed, this agreement serves as a testament to the cooperative effort made by all parties to ensure your financial recovery.
• Legal Escalation: In instances where an agreement cannot be reached through negotiations, the matter may need to be escalated to a Magistrate’s Court. The court involvement does not imply failure but rather underscores a commitment to finding a fair and legally binding resolution. It ensures that the repayment plan considered is not only reasonable but sustainable in the long run, taking into account your financial reality and the creditors’ rights.

5. Implementation of the Court-Approved Repayment Plan 

Once a repayment plan is approved by the court, it transforms into a binding legal agreement. This legal status mandates that you adhere strictly to the new repayment terms set out in the plan.

• Binding Commitment: The approval of the repayment plan by the court establishes a formal commitment on your part. You are required to make the agreed payments on time, in the manner specified in the plan. Failure to comply can lead to legal repercussions, as this agreement is enforceable under the law.
• Ongoing Protection: The court order not only formalises the repayment terms but also continues to provide protection against creditors. It legally prevents creditors from initiating any collection or legal actions outside the terms of the agreement. Should a creditor wish to modify any aspect of the agreement or pursue further claims, they must return to court to seek approval. This provides a significant shield for you, ensuring that all parties adhere to the agreed framework.
• Credit Monitoring and Adjustment: Throughout the duration of the repayment plan, your debt counsellor plays a key role in monitoring your adherence to the plan and assessing your overall financial progress. If your financial situation improves or deteriorates significantly, your debt counsellor can propose adjustments to the repayment terms. These adjustments would again require court approval, ensuring that any changes are fair and reflective of your current financial capacity.

For more information on how debt review can work for you, or how to start the application process, visit Debt Rescue. Our expert debt counsellors are dedicated  to guiding you towards a more secure financial future. 

Are you struggling with debt while earning an income? Do you owe more than R35K in total to creditors? If so, let our expert counsellors provide a no-obligation, cost-free assessment to consolidate and reduce your monthly repayments for immediate financial relief.

Contact us to speak with our expert counsellors and start your journey toward financial freedom.