An Overview of South Africa’s Debt Review Process

Debt review is a legal process designed to help individuals who are struggling to manage their debt. Whether you’ve heard about it or are considering it as an option, understanding the Debt Review process is crucial to making informed financial decisions.

The process provides a structured approach to financial recovery, allowing you to regain control of your finances and work towards a debt-free future. 

Let us delve into the step-by-step process of debt review in South Africa.

How Does Debt Review Work?

Taking the first step towards financial relief can seem daunting. But understanding the debt review process can empower you to regain control of your finances. 

The process of entering Debt Review follows a specific set of steps:

1. Assessment of Your Financial Situation

The first step is to approach a registered debt counsellor. They will review your financial position by assessing your income, monthly expenses, and outstanding debts. The debt counsellor will determine if you are over-indebted, meaning you cannot afford to meet your current debt obligations without borrowing more money.

2. Negotiation with Creditors

Once the counsellor confirms that you are over-indebted, they will negotiate with your creditors on your behalf. In doing so, they will attempt to lower your interest rates, reduce monthly payments, and, in some cases, extend the loan repayment periods to make your debt more manageable and affordable on a monthly basis.

3. Debt Restructuring Proposal

After negotiating with your creditors, the debt counsellor will submit a debt restructuring proposal. This proposal outlines the new repayment plan, which includes a single, consolidated monthly payment to be made through a Payment Distribution Agency (PDA). The PDA will distribute these payments to your creditors according to the agreed-upon terms.

4. Court Approval 

When the creditors agree to the proposal, the debt counsellor will present the new payment plan to Magistrate Court. 

5. Repayment and Debt Settlement

Under Debt Review, you will make monthly payments according to the new plan, and your creditors will be paid through the PDA. Once all your debts are fully repaid, excluding your bond, which must be up to date, your debt counsellor will issue a Clearance Certificate, indicating that you are no longer under Debt Review.

Managing Your Expectations 

If you’re feeling buried under a mountain of debt, know that you’re not alone. Many South Africans find themselves in a similar situation. Fortunately, there’s hope. Debt Review can provide a much-needed respite and a clear path to financial freedom.

Before you start the process, it’s important to consider all aspects of the Debt Review process: 

1. Manage Your Stress

   
   Once you enter Debt Review, you no longer have to deal with harassing calls from creditors or constant reminders of overdue payments. The process allows you to breathe easier and focus on following your repayment plan.

2. Credit Impact

   
   While Debt Review is in place, your credit report will reflect that you are under review. It’s true that this can negatively affect your credit score, as it indicates you’re not meeting your full debt obligations at the time. 

Once your debt is settled, however, your credit score will improve gradually as long as you continue to manage your finances responsibly.

1. Time Commitment

   
   Debt Review is not a quick fix. The process can take several years to complete, depending on the size of your debt and your ability to make regular payments. 

A saving grace to those who struggle to budget, Debt Review provides a structured plan that acts a compass, giving you direction toward finally getting rid of your all-consuming debt.

1. Ongoing Monitoring

   
   Throughout the Debt Review process, your debt counsellor will stay in contact to ensure your payments are being made according to the restructured plan. 

In some cases, the debt counsellor will revisit your plan and tailor it according to your financial situation if anything has changed.

Your First Step to Becoming Debt-Free

Debt Review offers a structured way to regain control of your finances, lower your monthly payments, and eventually become debt-free. The process provides important legal protections, helps you manage payments, and prevents repossession of your assets, giving you a fresh start on your financial journey.

If you think Debt Review is the right choice for you, get in touch with Zero Debt. Our registered debt counsellors will determine if you’re eligible, and guide you to becoming debt-free as quickly as possible. 

FAQs and Answers

1. What is debt review?
   Debt review is a legal process in South Africa designed to assist over-indebted individuals by restructuring their debt into manageable monthly repayments.
2. How does debt review work?
   The debt review process includes assessing your finances, negotiating with creditors, restructuring your debt, court approval, and repayment through a payment distribution agency.
3. What are the benefits of debt review?
   Debt review protects your assets, reduces your monthly payments, lowers interest rates, and provides a structured path to becoming debt-free.
4. How long does the debt review process take?
   The duration depends on your debt amount and repayment capacity. It can take several years but ensures a structured and affordable repayment plan.
5. Will debt review affect my credit score?
   Yes, your credit report will reflect that you are under debt review, impacting your score temporarily. Once debts are settled, your score will gradually improve.
6. What happens after completing debt review?
   Once you settle your debts, a clearance certificate is issued, indicating you’re no longer under debt review and can resume full credit access.
7. What role does a debt counsellor play in debt review?
   Debt counsellors assess your financial situation, negotiate with creditors, create repayment plans, and monitor your progress throughout the debt review process.
8. Can debt review prevent repossession of assets?
   Yes, debt review legally protects your assets by ensuring creditors cannot take legal action while you adhere to the repayment plan.