Debt Counselling Frequently Asked Questions

Debt Counselling or debt review is a regulated process whereby a debt counselor helps over-indebted consumers by developing an affordable repayment plan. The debt counselor will then negotiate a restructured payment plan and obtain a court order confirming the new repayment plan. The debt counselor deals with the customer’s creditors on their behalf in order to have the credit agreement extended and the installments reduced.

A debt counselor is a person that is qualified by and registered with the National Credit Regulator. A debt counselor helps consumers that are in debt by developing an affordable repayment plan. A debt counselor deals with the consumer’s creditors on their behalf and negotiates with the creditors in order to have the credit agreement extended and the installments reduced. Consumers can then cover their monthly expenses (food, school fees, transport costs, etc.) while also paying their creditors an agreed upon amount every month.

Debt Counselling is part of the National Credit Act and was created with the intention of assisting over-indebted consumers to repay their debt by extending the original credit agreement and reducing the monthly installments, to ensure that they can afford their reasonable living expenses and avoid legal action. Credit providers have to enter into negotiations with a debt counselor in order to find a reasonable repayment proposal for consumers that are under Debt Counselling.

This will depend on your unique financial situation. The fees charged by debt counselors are regulated by the National Credit Regulator. The fees will be explained to you once you apply for Debt Counselling and will be included in your debt repayment plan.

You are over-indebted if you are unable to pay your financial obligations as agreed in a credit agreement. If you spend or owe more money than you earn, you are likely to become over-indebted.

Firstly, a debt counselor will look into your financial circumstances. If the debt counselor finds that you are not over-indebted, the debt counselor can help you work out a better monthly budget to enable you to repay your debts effectively.

If the debt counselor, however, finds that you are over-indebted, you can apply to be placed under debt review. The debt counselor will then develop an affordable repayment plan tailored to your unique financial circumstances and make recommendations to the courts and your credit providers concerning restructuring your debt. Once the repayment plan has been put in place, you’ll have to pay the agreed upon amount to a payment distribution agency (PDA) every month. The PDA will then pay your creditors. This makes it easier for you as you’ll only pay one amount to the PDA instead of paying smaller amounts to each of your creditors. Once all your debts have been settled, a clearance certificate will be issued. The clearance certificate will state that all your debts have been settled as per the debt repayment plan.

The National Credit Act requires that all debt review cases must either go to the magistrate’s court or the National Consumer Tribunal (NCT). In order for the debt repayment plan to be put in place, a court order has to be granted. This, however, does not necessarily mean that you would have to appear in court. Certain courts require the debt review client to be present in court while others will allow the debt counselor to act as the client’s representative in court.

If you are placed under debt review, it will be indicated next to your name at the credit bureaus. But, once all your debts have been settled, a clearance certificate will be issued and there will be no indication at the credit bureaus that you have been under debt review. You can then enter into credit agreements again.

This will depend on your unique financial situation. Your debt counselor might negotiate with your credit providers to extend your repayment periods in order to lower your monthly installments. This means that it might take a bit longer for you to repay your debts than originally stipulated in the credit agreement. Your repayment plan will indicate when your last day of payment will be so you will know upfront when your debts will be repaid. This is, however, dependent on whether you stick to the payments as specified in the repayment plan.

No, while you are under debt review the law prohibits credit bureaus from blacklisting you. If you were blacklisted before applying for debt counselling, the negative listing will still appear on your credit record.

While you are under debt review, you will not be allowed to take out any new credit, e.g. a Personal Loan, home loan, credit card, etc. This is done to ensure that you don’t incur further debts, as the purpose of debt review is to reduce your current debt burden and to protect credit providers from being accused of reckless lending, if they are aware that you are over-indebted.

Whilst under debt review, it is important to stick to the repayment plan set out by the debt counselor. If you skip a payment, your creditors have the right to cancel your debt counselling agreement and take legal action against you.