Debt Restruct

Your Guide to Understanding the Debt Review Process in South Africa

Young couple sitting on a couch busy analysing the debt review process with their personal finances.

If you are not able to pay your debts owed to creditors, you may be eligible for going into debt review. Debt review is a legal designation established by the National Credit Act. It means you have proven you are over-indebted, and you agree to make debt payments according to new terms your debt counsellor has negotiated. 

Individuals that are in debt review are protected from creditors pursuing legal action against them, barred from any further borrowing, and obligated to make the agreed-upon payments for the duration of the process.


How Does The Debt Review Process Work

Debt review helps over-indebted consumers to manage to repay their debt more effectively by balancing their monthly debt cost with their current income, preventing additional debt from piling on, and governing the process via a regulated body.

When individuals have an imbalance between their income and credit expenses and are unable to pay their debt on time, they are deemed over-indebted and can apply for debt review.

Hundreds of thousands of over-indebted South Africans have been able to break free from the grip of debilitating debt by undergoing debt review. Here’s the debt review process step by step.


The debt review process (summarised)

Here is a step-by-step summary of the debt review process:

  1. Find out if you qualify by contacting a debt review firm or a debt counsellor.
  2. Get your financial documents for assessment and application to your debt counsellor.
  3. If you apply for debt review in writing, lenders and credit bureaus will be notified to protect you from further creditor harassment and uncontrolled lending.
  4. An experienced debt counsellor negotiates your new payment terms and makes sure your new repayment plan is approved.
  5. You continue to pay a reduced amount while you remain protected.
  6. You will receive a clearance certificate from your debt counsellor after you have completed your debt review.
  7. Congratulations on being debt-free!

Going through this process is way easier than holding on to the heavyweight of being over-indebted. It is important to mention that you are allowed to submit a postponement application in case of an unforeseen change in circumstances averts you from completing your payments.

Now that we’ve covered the summary, let’s go through each of the steps of the process in more detail.


Step-by-Step Guide to the Debt Review Process

These are the steps required to go into debt review.

1. Gather Your Financial Documents 

You will need the following documentation to apply for debt review:

  • Identification 
    • Proof of income: You are not eligible for debt review if you do not have a regular income.
    • Creditor statements: Your debt counsellor will need to see your bond accounts, vehicle finance agreements, credit card statements, and any unpaid bills to calculate your total debts.
  • Bank statements
  • Documented living expenses


2. Contact a Debt Counsellor 

The goal of the National Credit Act is to limit predatory lending and provide a way for over-indebted individuals to get out of debt. Debt counsellors play an essential role in accomplishing this goal. 

The primary tasks of a debt counsellor are to: 

  • Review your financial situation: They consider your income, debt, and living expenses to determine if you are over-indebted. They then determine the best plan for repaying your debt moving forward. The repayment plan they make allows you to meet your basic living needs while you pay down your debt. 
  • Navigate the debt review process: They file the forms required to apply for debt review, establish your protection from creditors, confirm over-indebtedness, and get approval of the repayment plan from the courts. 
  • Communicate and negotiate with creditors: They contact all of your creditors to inform them of your application for debt review. Then they request detailed records of your debts. Finally, they negotiate a debt repayment plan you are capable of following. In this negotiation, it is possible they lessen your total debt owed, decrease the interest charges, and change the payment timeline.

Debt counsellors must be registered with the
National Credit Regulator (NCR). It is important that you cross-check their NCR ID number with the NCR database of debt counsellors. Debt counsellors do charge a fee for their services. Fees should fall within the guidelines set forth by the NCR. 


3. Apply for Debt Review 

Your debt counsellor notifies all creditors (Form 17.1) that you are going into debt review as soon as you sign the formal application for debt review (Form 16). At this point, two very important things happen. One, creditors can no longer pursue your debt in any legal manner. Two, you are not eligible to receive any further credit. 

Your debt counsellor will then submit the form confirming you are over-indebted (Form 17.2). If you wish to withdraw from the debt review process, you must do so before this step.

Check to see if you qualify to reduce your debt instalment with our quick quiz

4. Agree to the Repayment Plan 

Your debt counsellor’s negotiation with your creditors may involve several rounds of proposals by the debt counsellor and counterproposals by the creditors. Typically, an agreement is reached during this negotiation process and sent to the National Consumer Tribunal for approval. In rare cases, the counsellor must appeal to the Magistrate’s Court to get a plan approved.

Once your debt counsellor has negotiated new terms with all of your creditors, you will sign an affidavit confirming you agree to the terms of the repayment plan. 


5. Make Payments 

You can make payments directly to your creditors or use an intermediary called a payment distribution agent (PDA). If you choose to make one payment to a PDA, the PDA distributes the money to the creditors as laid out in the payment plan. They keep track of all payment amounts to individual creditors and issue monthly statements for you and your debt counsellor. The PDA exists to simplify your payment process.

It is extremely important that you make all payments on time, as this is required by The National Credit Act. If one payment is late, short, or absent, your legal protection from creditors disappears. 

The payment plan is typically a long-term solution for getting out of debt, lasting anywhere from three to five years, or possibly longer. 

Defaulting on your debt payment

If you make a default debt repayment, it means that one of the following things happen:

  • You pay less than the agreed-upon instalment
  • You pay later than agreed
  • You do not pay at all!

Section 86(10) of the National Credit Act allows a credit provider to terminate the Debt Review when the account is unpaid and take legal action against the account, meaning your creditor may issue a summons immediately. This is when the creditor does not issue for arrears or defaulted amounts due to them, but for the entire outstanding balance of the agreement.

If you have a home loan account and default, for example, you may lose your property. Unless repayment arrangements are negotiated with credit agreements outside of the debt review, these accounts will appear under your monthly expenses as a normal expense. Additionally, the reduced instalments and renegotiated interest rates will not be applicable anymore.

Keep this in mind, if you are having trouble repaying your debt. Things could get worse in the future, and that will put you at greater risk. It’s better to get ahead of the problem before it is too late.


6. Payment Postponement Application 

While you are in debt review, you can apply for a postponement of your payments if you experience a crisis or significant change in income that prevents you from making payments. Your debt counsellor will help you file this application.

But, what happens to your debt if you get retrenched

If you are already under debt review, then you will need to notify your debt counsellor of your retrenchment as soon as possible.

If you aren’t under debt review, then it is imperative that you contact your creditors immediately and see if there are any good terms for repayment. In case of retrenchment, your debts will be due as usual. However, it is common for credit arrangements to contain clauses that apply if you are searching for a new job, in which case a grace period of two months can be provided.Creditors may send you a Section 129 Notice if you are unable to repay your debt and be forced to take legal action.


7. Complete Debt Review

When you have made all payments of the payment plan, your debts to all creditors are paid. Your debt counsellor will issue your Clearance Certificate and remove your name from the NCR. At this point, your credit record is cleared, and you are eligible for obtaining credit should you need it. Your bond does not need to be paid in full to exit debt review – it only needs to be up to date according to the payment plan. 

If you have not made all the payments in your plan, but you no longer want to be in debt review, you will need to prove to the court that you are no longer over-indebted.


 8. Bonus: Staying out of debt

As soon as you are debt-free, it is important that you don’t relapse into the same habits.  Here are a few ways that can help you stay out of debt:

  • Settle on spending cash: The physical representation of your money ensures that you don’t overspend. It is also beneficial to use cash since it minimises charges on your bank account.
  • Set a personal budget: Establishing a detailed personal budget allows you to set financial goals and stay accountable for your spending. Here are a few free budgeting apps that can help.
  • Avoid gambling: This one is a no-brainer. Avoiding gambling will help protect you from spending too much.
  • Monitor your credit: Be mindful of your credit score and make timely payments on your credit card as much as possible. 


Withdrawing from The Debt Review Process

Applicants can withdraw from the Debt Review Process prior to the issuance of a Form 17.2 Notice by providing written instruction to the Debt Counsellor.

If the Notice is already issued then the procedure for withdrawing changes, and a formal court application will be required.

The Form 17.2 Notice confirms that the consumer is in-fact over-indebted, therefore they will need to prove that they’re no-longer over-indebted to withdraw. Which involves a formal court application.

Only once the application to withdraw is granted by the court will the debt counsellor be instructed to inform the National Credit Regulator that the debt review listing should be removed from the applicant’s credit profile.

Withdrawal should only be considered if the applicant is confident in their ability to repay their outstanding debts on their own.


Debt Restruct Can Guide You Through the Debt Review Process

Debt Restruct has been recognized as one of the Top 10 Large Debt Counselling Firms by the Debt Review Awards. Our debt counsellors can guide you through debt review and help you come out on the other side debt-free, with a clear credit record.

Take our free, no-obligation debt assessment quiz to get started.

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Disclaimer: This website and any information herein is not intended to be, nor does it constitute, financial, tax, legal, investment, credit, or other advice. Before making any decision or taking any action regarding your finances, you should consult a qualified professional directly.

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