Debt Review Process: A Step by Step Guide
The Debt Review Process can be a daunting one, especially with the growing numbers of scams we see and hear about these days. You should ensure you are consulting a reputable debt review counsellor to make certain that you are following the below steps to complete your debt review so that you can begin a new debt-free life from scratch:
- Your chosen Debt Counsellor will take a thorough look at your personal particulars and financial circumstances to begin the debt review process to determine whether or not you are over-indebted and indeed qualify for a debt review application. You will begin your application for the debt review process by working with your counsellor to provide all the information requested in Regulation 24(1)(b), and filling out Form 16. This includes declaring all your debt; home loans, vehicle financing, personal loans, income, your monthly expenses, store cards etc. Your accounts will then need to be verified with all your creditors; information such as that mentioned above will need confirming.
- After you are vetted and your application is accepted, your counsellor will update the NCR’s DebtHelp system and Form 17.1 will now be issued. You’ll receive your NCR number and confirmation that you are commencing with your debt review; all credit bureaus will be notified you are under debt review, and your status will be flagged on their systems under your profile. Your accounts will now be frozen, and any use of credit, by card or other, will result in the potential loss of protection the debt review promises consumers, and may open you up to legal threat from your creditor providers.
- A Certificate of Balance (COB) will be issued to you once your information, as well as your creditors’ information is consolidated. A COB is an outline of your agreement with creditors and is necessary to confirm interest rates, balances in arrears and remaining terms. At this point in your debt review, you are still able to cancel your debt review application by written instruction to your counsellor.
- The debt repayment process will differ from person to person as it will depend on the consumer’s circumstances, as well as their ability to afford the monthly payments agreed upon. A debt repayment proposal will be drafted up by your counsellor at this stage; Form 17.2 (confirmation of over-indebtedness notice) is sent out by your counsellor to your credit providers and bureaus notifying them
that you qualify and that a restructuring proposal can go ahead. Your repayment plan will list all relevant creditors, your debt and balances outstanding according to the COB’s, the proposed monthly instalment, and adjusted interest rates and repayment terms of your debt review plan.
- Negotiation for your debt review proposal constitutes this final step before you can begin paying away your debts according to your approved debt review plan. In the case that all your credit providers agree to your debt review counsellor’s proposal, it will be referred to the National Consumer Tribunal in terms of section 138 for a Consent Order. In the case of one or two credit providers not consenting to the debt review proposal, a declaration by a Magistrate’s Court stating the consumer is officially over-indebted is the next step in the debt review process. Attorneys are appointed for you by your counsellor so it’s not necessary for you to appear in court. The order will be granted once your credit providers have viewed and agreed to the debt restructuring plan drafted by your counsellor. For this declaration, your debt review matter is presented under Section 86(8) of the Act or the Tribunal in terms of section 138.
- Your debt review payments begin in the month you sign your Form 16, and once this starts, credit provider payments and contracts are no longer directly paid by you. Your debt review payments will be allocated to the relevant credit providers by a Payment Distribution Agent (PDA), in terms of the National Credit Act.
- A Debt Clearance certificate signalling the conclusion of the debt review is issued by your debt counsellor once you have paid off all monies owed. Your counsellor will notify the NCR, and credit providers and bureaus via the NCR DebtHelp system. After this you will be unflagged on all systems and be able to make use of credit again and rebuild your credit score from scratch.