What is a Debt Review Court Order, and Why is it Important?

What is a Debt Review Court Order?

A debt review court order is a legal document granted from the Magistrates court. This court order is issued after your debt counsellor has worked with your creditors. The goal is to reduce and restructure your monthly payments.

This court order makes the new repayment plan legally binding for both you and your creditors.

How Does the Debt Review Court Process Work?

1. Application for Debt Review: After you apply for debt review, a registered debt counsellor will assess your financial situation. They will review your income, expenses, and total financial obligations to determine whether you are over-indebted.
2. Negotiation with Creditors: The debt counsellor will negotiate with your creditors to agree on a restructured repayment plan. This plan will lower your monthly repayments to make them more affordable based on your current financial situation.
3. Submission to Court: Once the debt counsellor and creditors agree on the new repayment terms, the plan is submitted to a magistrate’s court. The court will review and approve the plan.
4. Court Approval: The magistrate will review the proposed repayment plan to ensure it is reasonable and fair to both you and your creditors. If the magistrate is satisfied with the terms, they will grant a court order. This court order formally restructures your debt and legally obligates your creditors to accept the new repayment plan.
5. Protection from Legal Action: After the court order is granted, you are legally protected from any further legal action by your creditors as long as you adhere to the new repayment plan. Creditors cannot take you to court, repossess your assets, or garnish your wages.

What Forms Are Involved in Debt Review?

The debt review process involves several important forms that ensure this process is transparent and that all parties are informed.

• Form 16: This is the form you fill out when you apply for debt review. It contains your personal information, details about your creditors, and your current financial situation.
• Form 17.1: Once your application has been submitted, your debt counsellor sends Form 17.1 to all your creditors, letting them know you’ve applied for debt review. At this point, your creditors must send a certificate of balance (COB) to your counsellor, which shows exactly how much you owe, including interest, arrears, and fees. This information is essential for your debt counsellor to assess your total debt and propose a new repayment plan.
• Form 17.2: After your debt counsellor has completed the assessment, Form 17.2 is sent out to your creditors, confirming that your debt review application was approved and your debts are being restructured. 

This notice also informs creditors that:

• Payments will only begin after all legal and restructuring fees are fully paid.
• If you’ve arranged to make monthly payments through a Payment Distribution Agency (PDA), creditors must immediately cancel any existing debit orders to ensure payments follow the new plan.

Do I Have to go to Court for a Debt Review Court Order?

In most cases, you do not have to appear in court. 

• Magistrate’s Court: If the case goes to the Magistrate’s Court, an attorney will represent you.
• National Consumer Tribunal: If handled by the National Consumer Tribunal (NCT) your debt counsellor submits documents electronically.
• Court Date: You and your creditors will be notified of the court date for the assessment.

What Happens Once the Debt Review Court Order is Granted?

Your new repayment plan becomes active.

• All your debt payments are consolidated into one affordable monthly instalment.
• The Payment Distribution Agency distributes this payment to all your creditors.
• You will continue to make payments until all your debts are settled. 
• It is important to stay committed to your new repayment plan. 
• If you don’t, the court order could be cancelled, and your creditors could start legal action again.

Once you’ve fully paid off the debts included in the court order, your debt counsellor will issue a debt clearance certificate. This means you’re officially debt-free. The debt review status will be removed from your record, and you can begin rebuilding your credit score.