Debt Counselling

FAQ

What is Debt Counselling?

Trained individuals (called Debt Counsellors) will help you to deal with your debt. They will deal with your creditors and come to an agreement that allows you to cover your living expenses and apportion the remainder of your available funds to your creditors. Debt Counsellors will conduct an independent enquiry into your financial circumstances and make recommendations to Credit Providers and the courts concerning restructuring your debt or even suspending "reckless" credit agreements. You may not actually be "Over-Indebted" and qualify for "Debt Review", in this case the Debt Counsellor will assist you to work out a better monthly budget which will enable you to repay your debts effectively.

What is Debt Review?

This is the process of being assessed and assisted by a Debt Counsellor. The process begins with your application and ends with the issuing of a "Clearance Certificate" once all your debts are settled. The process time can vary, depending on how much debt you have to repay or by you (the consumer) failing to make your agreed upon repayment.

What does it mean to be "Over-Indebted"?

While this is now a legal term it basically means that anyone who, after deducting living expenses from their net salary, has less cash left over than the installments on their total debt, may apply for counselling as they are probably "over-indebted".

What are the Pro's and Con's of Debt counselling?

Pro's:

Con's:

What is Debt Counselling going to cost me?

Different Debt Counsellors may charge in slightly different ways. However the legislated industry standard is: R50.00 upfront, a possible R300.00 "rejection" fee (This fee is well worth it if the Debt Counsellor can help you rearrange your budget in such a way that you can cover all your costs each month). Normally Debt Counsellors waive these small fees. Most are just happy to help advise you even if you don't sign up. Further cost for debt review will be absorbed from your first rescheduled debt repayment, once negotiations with your creditors are done, amounting to either up to R6000 of the first repayment or R6000 if it is a "Joint Application". There is also a small monthly fee (to monitor your progress) of 5% (for the first 24 months) and thereafter 3% of your monthly repayments. These are the fee guidelines from the National Credit Regulator. You should expect to pay from the very first month. Do not expect any payment holidays.

Since Debt Review goes to court there will also be some legal fees. These can be as little as R750 if the creditors like the proposals sent or more if they fight the proposal. Either way these legal fees should come out of your second months debt repayment (not over and above your monthly repayment amount).

What is a Joint Application?

This is a common type of application for Debt Review, where both partners (applicant and spouse or partner) go under review. This is the recommended application type for couples and is obligatory for couples married "C.O.P." or communion of property.

What is a Joint Application?

This is a common type of application for Debt Review, where both partners (applicant and spouse or partner) go under review. This is the recommended application type for couples and is obligatory for couples married "C.O.P." or communion of property.

Will I have to sell all my assets?

This is unlikely. It might be wise to sell some assets that you do not need but this will be discussed with you and where needed you can consult with a FAIS advisor. Normally the debt review process helps consumers keep assets like their home and car. This is commonly called "good debt".

I have a summons or Section 129 letter - is it too late?

It is never too late to get good advice. Even if one of your debts has a summons all your other debts are no doubt pressurizing you too. A Debt Counsellor can try make arrangements with your creditors even those who have a judgment or garnishee order. They might not be part of the Debt restructuring Court Order but will be taken into account in planning your monthly costs.

I was under debt review before - can I sign up again?

By law, yes. If you were under debt review before and stopped paying you will find great resistance to the process from creditors. It will be an uphill battle. Knowing this you are forewarned that it will not be a simple affair but it is possible. Ask yourself if I did not stick to the process before will I stick to it this time? If you were under debt review and paid up all your debts before and got into trouble again it will be a much easier process and the creditors and court will be much more willing to help.

How long will it take?

Each consumers situation is different but many consumers are able to finish repaying their debt within 60 months. In most cases this means they have paid off all their smaller debts and only have a bond left. At this point many consumers then withdraw from the process and pay their creditors directly. In some consumers cases they are only under debt review for a few months such as during maternity leave or while waiting for the sale of an asset.

Should I pay a Debt Counsellor directly or make a cash deposit?

Be careful if anyone asks you for money before doing anything for you. Be careful if a Debt Counsellor handles money for the process. If they say they do ask them to show proof that they are allowed to do so by the National Credit Regulator or by the National Credit tribunal. The National Credit regulator advise only using Debt Counsellors who make use of a Payment distribution Agency. These agencies are audited regularly to make sure your money is safe.

What is "reckless credit"?

When a creditor gives a consumer credit that they know they cannot repay that is called reckless credit. There are also other types of illegal credit agreements. If you think this has happened to you a Debt Counsellor can investigate to see if reckless Credit has been granted. If this is the case a court could order the debt not to be repaid or postpone repayment on that debt.

Will I have to go to court?

Yes, probably as you will have to sign the debt restructuring court order. It is not that scary but sadly it is also not that exciting. Mostly it is a lot of waiting around. Your Debt Counsellor will tell you how to act and dress. Don't worry about it. Going to court is good as a Court Order will help protect you and your assets.