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 cousellors will conduct independent enquiries into your financial circumstances and make recommendations to Credit Providers or even 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 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 instalments 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:

• Once a consumer has made application for Debt review, Credit Providers can no longer attach any assests or take any further legal action against the consumer pending a determination by a Debt Counsellor as to whether the consumer is actually "Over-Indebted" or not. Should the consumer be "Over-Indebted" the consumer continues under Debt Review until all debt is settled.
• There is no permanent record of being under Debt Review kept on any Consumer Credit Bureau Data Base, meaning that unlike Administration or other avenues, the process leaves no black mark against your name.
• Repayment of your debt obligations is done through one payment (to a payment distribution agency).
• The Debt Counsellor will set aside a certain amount of income for your necessities (food, school fees, transport costs etc) and you then use whatever money you have left over to pay your debts. You will never pay more money than you can reasonably afford.
• A registered Debt Counsellor is far more likely to get a positive response from your creditors when it comes to negotiating your repayments than you might as a consumer.
• While under "debt review", you only make one monthly payment - to a payment distribution agency - who in turn pays all your creditors. This one easy payment will make your finances much easier to manage and reduce your banking fees.
• A qualified Debt Counsellor will be able to advise you on ways to cut your monthly costs.
• Relief from all the stress of being in debt. You will get good advice and know that you are doing something about the problem. Knowing that one day the debt will gone, as will any record of it puts your mind at ease. No more letters you are too scared to open. No more phone calls you are to0 nervous to answer. Dealing with the problem rather than ignoring it gives you an instant feeling of relief.

Con's:

• While under debt review a person can no longer get access to new credit.
• While this may seem to be a negative thing, it is actually built into the process to protect consumers from becoming further indebted and to protect Credit Providers from being accused of "reckless lending".

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 (which should cover creating a new budget for the consumer and advice). Further cost will be absorbed from your first rescheduled repayment, once all your creditors agree, amounting to either up to R3000 of the first repayment or R4000 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.

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