Debt review: Is it a pass or a perfect fit for your debt situation?

While some may give debt review the immediate thumbs-down due to not fully understanding the ins and outs of the process, for others, debt review can be their last resort to not lose their car or home. Picture: Freepik

While some may give debt review the immediate thumbs-down due to not fully understanding the ins and outs of the process, for others, debt review can be their last resort to not lose their car or home. Picture: Freepik

Published May 20, 2024

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There are conflicting opinions surrounding debt review, also known as debt counselling.

And I want to make it clear: debt review isn’t for everyone.

But, while some may give debt review the immediate thumbs-down due to not fully understanding the ins and outs of the process, for others, debt review can be their last resort to not lose their car or home.

It is essential for over-indebted South Africans to, therefore, understand and carefully consider the debt relief options (including debt review) available to them to find the ‘perfect fit’ that can help improve their financial journey.

Here are a few things to keep in mind regarding the debt review process – a debt relief option for South Africans:

Debt review explained in a nutshell

Debt Review is a legal process under the National Credit Act (NCA) and regulated by the National Credit Regulator (NCR).

The programme is specifically designed to assist individuals overwhelmed by debt and declared as ‘over-indebted’.

It offers a structured approach to debt management by restricting a consumer from taking on new debt while repaying existing debts.

Through this process, a registered debt counsellor assesses a person’s financial situation and negotiates with their creditors (on their behalf) to create a manageable repayment plan concerning the individual’s budget and affordability.

Debt review involves a single, lowered, consolidated monthly instalment spread over an adjusted term, providing a lifeline and debt relief for those who qualify.

Who can benefit from debt review?

Debt review may not be an option or solution for everyone to consider, but here is a list of factors concerning a ‘probable candidate’:

– A consumer who is experiencing financial hardship, struggling to make ends meet, not keeping up with living costs and multiple debts, or already in arrears with their credit accounts.

– A consumer still receives an income or some form of income, for example, financial assistance and support from a family member. In short – for someone overwhelmed by debt, but still earning an income, debt review offers a way to manage their debts and cover essential living expenses.

– Lastly, keep in mind that debt review accommodates single and joint applications. In a traditional or community of property (COP) marriage type (where an estate is regarded as a joint estate), couples must apply for the process together.

In marriages under an Ante-Nuptial Contract (ANC), applicants may need to apply for a single or joint application, depending on their financial arrangements, such as joint bonds.

Debt review is not for everyone. Understanding who may not qualify or benefit:

Insufficient debt or not getting enough income

Those with insufficient debt and/or not receiving enough income per month may not qualify.

It’s crucial to ensure that the numbers align – if there’s no tangible benefit, consumers might find themselves worse off. It is key to realise that debt review operates as a targeted debt relief solution.

Consumers who are not prepared to bite the bullet will not benefit from debt review’s designed purpose – one of the main reasons why the debt review process usually fails.

Disputing the debt review process

People tend to dispute the debt review process (stop paying or not complete it and want to get themselves unflagged as being under debt review before their debts have been paid up) instead of challenging their creditors and those existing credit accounts.

Debt-related judgements

Consumers who ‘play the ostrich’ and want to hide from their creditors to ‘avoid’ legal action won’t make it onto the debt review lifebuoy ring.

Individuals, in fact, still have a ‘consumer right’ opportunity (when they have lapsed on payments) to approach a registered debt counsellor for assistance within ten (10) days after a Section 129 letter has been issued via their creditors – a lifeline on a tray.

In many cases, consumers fail to respond within ten (10) business days of receiving the notice.

If they have been in default with their credit account(s) for twenty (20) business days already, their creditor(s) will indeed proceed to take or institute legal action against them.

South Africans must approach debt review and all available debt relief options with careful consideration.

Debt review may not be a one-size-fits-all option but can indeed prove to be the ideal solution for someone in dire want of their assets needing protection as well as instant financial relief.

When it comes to debt review as an option, never say never. Various consumers have had their doubts about the process, and yet, so many have found it to be so much more than “just a helping hand.

*Wikus Olivier, managing director at CreditSmart Financial Services.

**The views expressed here are not necessarily those of IOL or of title sites.

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