How does debt review works in South Africa

Debt review, also known as debt counseling, is a legal process available in South Africa designed to help individuals who are struggling with overwhelming debt. It is regulated by the National Credit Act (NCA) and is aimed at providing a structured plan for individuals to manage and ultimately overcome their debt.

Here is a step-by-step guide on how to use debt review to get out of debt in South Africa:

1. Assess your financial situation: The first step is to evaluate your financial position thoroughly. Calculate your total debt, including loans, credit cards, and other outstanding balances. Determine your income and expenses to get a clear understanding of your financial capabilities.

2. Find a registered debt counselor: Debt review can only be facilitated by a registered debt counselor. These professionals are authorized by the National Credit Regulator (NCR) to provide debt review services. You can find a list of registered debt counselors on the NCR's website.

3. Consultation with the debt counselor: Schedule a consultation with a debt counselor to discuss your financial situation in detail. They will assess your eligibility for debt review and explain the process to you. During this session, you will need to provide all relevant financial documents, such as payslips, bank statements, and details of your outstanding debts.

4. Application for debt review: If the debt counselor determines that you meet the criteria for debt review, they will help you prepare the necessary documentation and submit an application to a registered debt review court. The court will then issue a Form 17.1, which places you under debt review and provides immediate protection from legal action by your creditors.

5. Debt review process: Once under debt review, your debt counselor will engage with your creditors on your behalf. They will negotiate with them to restructure your debt repayment plan. This may involve reducing interest rates, extending repayment terms, or even suspending certain fees.

6. Debt repayment plan: The debt counselor will develop a repayment plan based on your income and expenses, ensuring that it is realistic and manageable for you. They will submit the proposed plan to the court for approval. If the court accepts the plan, it becomes a court order and is legally binding on both you and your creditors.

7. Monthly payment: Under the debt review plan, you will make a single monthly payment to a Payment Distribution Agency (PDA) approved by the NCR. The PDA will distribute the funds to your creditors as per the court-approved plan. This consolidation of payments simplifies the repayment process and ensures that your creditors receive their dues.

8. Completion of debt review: Once you have successfully made all the repayments as per the court-approved plan, your debt counselor will issue a clearance certificate. This certificate confirms that you have fulfilled your obligations and completed the debt review process.

It is important to note that while debt review can provide relief and a structured plan to manage your debt, it is a serious commitment. During the debt review process, you will be required to adhere to a strict budget and make regular payments towards your debt. It is crucial to maintain discipline and avoid acquiring new debt during this time.

Debt review can be an effective tool for individuals in South Africa to regain control of their finances and work towards becoming debt-free. However, it is advisable to seek professional advice from a registered debt counselor to fully understand the implications and suitability of debt review in your specific situation.