The Debt Counselling Process and How It Works

If you have approached…
  1. Provide Detail
  2. Debt Assessment
  3. Create a New Budget
  4. Negotiation of Repayments
  5. Plan Approval
  6. Implementation
  7. Complete


The Debt Counselling Process and How It Works

Debt Counselling starts with you choosing and contacting a debt review company, but let us assume that you have already approached a company and are about to start the debt counselling process.


Provide Detail

When applying for Debt Counselling, the first thing you are going to do is fill-out an application form and provide your debt counsellor with details of your income, monthly budget and debt commitments.


Debt Assessment

To qualify for debt counselling, you need to be deemed over-indebted. So, your debt counsellor will assess your total debt to determine if it is serious enough for you to need debt counselling. The debt counsellor has 30 business days, from the date of your application, in which to make this determination.
Once your debt counsellor has determined whether you are over-indebted or debt stressed, he or she is obliged to follow a certain procedure as prescribed in the National Credit Act. The procedure will depend on the debt counsellor’s determination.


Create a New Budget

Once it is determined that you need help with your debt, you will have a consultation with your debt counsellor. In this meeting, you will be given a budget designed around a new repayment plan. When you have agreed to this, your application will be accepted.


Negotiation of Repayments

So that you continue to pay your creditors throughout the process, your debt counsellor will draw up an interim repayment plan, which he or she must submit to a registered payment distribution agency (PDA).
Once declared over indebted and accepted into debt counselling the following will happen:

  1. You will be protected from legal action for a period of 60 days from the day of application and after the arrangement has been concluded as long as you pay according to the new arrangement;
  2. All your creditors will have to stop calling you and liaise with your debt counsellor;
  3. You will be listed at the Credit Bureau as being under debt counselling.

Next, your counsellor will contact your creditors to negotiate a repayment plan on your behalf. This plan may make use of negotiated fees, rate concessions and an extension of terms to put you in the best position to pay back all your debt.
If all your creditors accept your debt counsellor’s repayment proposal, your debt counsellor must obtain a consent order from the National Consumer Tribunal or a magistrate’s court, again within 60 days.


Plan Approval

Debt review is a legal process, and in this step the contract makes the new payment plan binding. This protects you from potential increases in monthly instalments and commits you to meeting the new repayment plan.
If you or any of your creditors rejects the repayment proposal, your debt counsellor must refer the matter to a magistrate’s court with a recommendation, which he or she will seek to have made an order of court. A magistrate can reject the debt counsellor’s recommendation if he or she considers the proposal unreasonable. Unless the magistrate gives the counsellor another chance to improve on the proposal, this has the effect of a termination of the debt review process.



You will start making payments according to your new repayment plan from your very first payday. Only one payment is made every month to the debt review company, who then pays your creditors.

If your creditors accept the repayment plan, or if a magistrate’s court agrees to the repayment plan, a PDA will channel your revised payments to your creditors. You make these payments directly to the PDA. The PDA is responsible for providing monthly statements to you and payment schedules to your debt counsellor and creditors, as well as attending to queries from the respective parties.



Once you have repaid your debt, you can request a Clearance Certificate. Even though this allows you to apply for credit again, think twice and remember what got you into hot water in the first place.
Once all of your debts have been paid, your debt counsellor will issue you with a clearance certificate and will notify the credit bureaus that you are no longer in debt counselling. The fact that you were in debt counselling will be expunged from your credit record, but if you had judgments against you, these will remain on your record for the remainder of the five-year data retention period.

For as long as you are under debt counselling you will not be allowed to get credit until you are issued with a Clearance Certificate once you have satisfied your obligations as per the Court or Tribunal order and in line with the National Credit Act.


Points of Note:

  1. During the first 60 business days from the date of your Debt Counselling application, legal action may not be taken against you in respect of debts that are “under review”. This means that if the creditor has not already proceeded with legal action against you, you have two months in which to negotiate a payment arrangement. But if your creditors have already begun taking action against you in respect of some of your debts, you do not enjoy this protection, and these debts can be excluded from debt counselling.
  2. Within a period of 5 business days of accepting your application for debt counselling, your debt counsellor must inform all your creditors and the credit bureaus of your application. The debt counsellor does this by sending your creditors a prescribed form and calling on them to issue a certificate of balance (which is a “certified notice of the balance of a customer’s account, and accrued interest and charges, at the close of business on a specific date”).
  3. Your creditors are required to provide your debt counsellor with certificates of your account balances. This information helps the debt counsellor to determine whether or not you are over-indebted and to conduct an affordability assessment. The affordability assessment is aimed at working out how much you can realistically afford to spend on debt repayments.
The Debt Counselling Process

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