by You hear your phone ring, and your palms become sweaty. You look at the screen and recognise the number – because they’ve been calling you everyday for two weeks. Tentatively, you swipe the green icon, and then hold your breath as Portia, “from the collections department,” informs you that you’re in arrears on your account.
If you’ve ever avoided calls like these, chances are you’ve been over-indebted at least once in your life. And we’re not talking about that one month you threw caution to the wind and got trigger happy on takealot.com. We’re talking about, over a period of time, you racking up more debt with credit providers – from retail accounts, to credit cards, to motor finance – than you could logically afford to pay even the minimum instalment on, every month.
The National Credit Act (NCA) defines over-indebtedness as being unable to to meet all your financial obligations in a timely matter, as determined by a debt counsellor. But, further than that, they’ve also introduced Debt Review to assist, “over-indebted consumers,” like yourself, by putting together a repayment plan that’s more affordable to you, but also acceptable to all your credit providers.
Is Debt Review Right For You?
This is a formal process where a registered debt counsellor will deal with all of your creditors on your behalf. All you do is pay them a “single provisionally reduced monthly instalment”. Now, before you jump for joy, know that Debt Review does come at a cost.
Your repayments will be reduced, but your debts will take longer to pay off. Up to seven years for even a short-term debt. The interest rate may increase, and debt counsellors are entitled to a percentage of the repayment amount. Although this is cut off at R342.
Once a debt counsellor has declared you over-indebted, you won’t be able to take on any more debt until you’ve paid all your creditors without having to appeal to the court.
If this is where you’re at, then let me explain how it works. You will need to:
1. Fill In a Form
You fill in your details here and have a debt counsellor call you for further assessment.
2. Get Assessed
The debt counsellor will determine whether your monthly expenses exceed your income and declare you over-indebted.
3. Hand Over Contact With Credit Providers
All your credit providers and the Credit Bureaus will be notified that you are under Debt Review, and they’ll be asked to provide the debt counsellor with all the details regarding your outstanding accounts.
(PS. During the first 60 working days, no legal action may be taken against you relating to the debts that are under review. Bonus.)
4. Restructure Your Payment Plan
The debt counsellor will restructure your payment plan. By negotiating with your Credit Providers where necessary, you will begin paying a “single provisionally reduced monthly instalment” as calculated according to your affordability. So you’ll still be able to cover your living expenses (but perhaps no DSTV).
5. Go To Court
The debt counsellor will apply to court on your behalf (you don’t need to be there – unless the magistrate specifically requests your presence). They will act as the applicant in the matter and make your restructured payment plan a court order.
And that’s it, no more calls from Portia. Now all you need to do is make sure you make your monthly payments on time and no Credit Providers will take legal action against you.
