Exiting Debt Review: Legitimate Paths vs. Scams

The legal process for debt review removal in South Africa is structured around distinct stages, particularly concerning the repayment status of all debts, excluding your home loan.

Below, Zero Debt’s debt counsellors break down what the process entails under two different circumstances: after settling your outstanding debt and before settling your debts in full.

1. Debt Review Removal After Settling Your Debt

If you have completed the debt review process and paid off all your debts (excluding a home loan, if applicable), you can apply for debt review removal following these steps:

• Obtain a Paid-Up Letter: Request paid-up letters from your credit providers as proof that all your debts are fully settled.
• Obtain a Clearance Certificate (Form 19): Your debt counsellor must issue a clearance certificate confirming that all debts (except a home loan, if still under debt review) are paid and that your credit profile is clear.
• Notify the Credit Bureaus: Once you receive your clearance certificate, your debt counsellor will notify the credit bureaus to remove the “under debt review” flag from your credit record. This typically takes 21 business days to reflect on your credit profile.
• Check Your Credit Report: After the removal, check your credit report to ensure that your debt review status has been removed.

2. Exiting Debt Review Before Settling Your Debts

As you can imagine, exiting debt review before you have settled all your debts is more complex. Because debt review is a legal process, you cannot exit unless a court declares that you are no longer over-indebted or if the process was entered into incorrectly.

Court Application for Removal

You must apply to a magistrate’s court with the help of a lawyer to get an order stating that you are no longer over-indebted. The procedure can be costly, taking into account legal fees and court costs, such as filing applications.

Irrespective of the costs, this process is also time-consuming, with a timeline hinging on the complexity of the case, court scheduling and document preperation – all of which would likely take several weeks or months to complete.

The Danger of Debt Review Removal Scams

Many enethical companies falsely claim they can remove your debt review status without you having to settle your outstanding debt. These promises are misleading and illegal, posing severe consequences for anyone who falls for these scams, including:

• Legal Consequences – Attempting to exit debt review improperly may result in legal action from creditors, as your debt will simply remain unpaid.
• Financial Setbacks – You may lose the protection debt review provides as a result of non-payment, leading to repossessions, garnishee orders and “blacklist” credit scores.
• Fraudulent Practices – Many of these companies charge exorbitant fees without delivering any real results, leaving you worse off financially.
• Credit Bureau Impact – If your debt review status is removed unlawfully, credit bureaus may still reflect a negative record, affecting your ability to obtain credit in the future.

As per the National Credit Act (NCA), the only legal way to exit debt review is by fully repaying your debts and obtaining a clearance certificate from a registered debt counsellor.

Contact Zero Debt for reputable debt counselling from experts who are qualified and eager to help you become financially free!

FAQs and Answers

1. Can I exit debt review after paying off all my debts?
   Yes. Once all debts are paid (excluding a home loan), you can exit by obtaining a clearance certificate from your debt counsellor.

2. What is a clearance certificate in debt review?
   It is an official Form 19 issued by a debt counsellor, confirming all your debts are settled and allowing the removal of the debt review flag.

3. How long does it take for credit bureaus to update my status?
   It typically takes up to 21 business days for credit bureaus to update your credit profile once notified of your clearance certificate.

4. Can I exit debt review before settling all debts?
   Yes, but only through a court order declaring you are no longer over-indebted or if the process was entered into in error.

5. What are the risks of using unregistered companies for debt review removal?
   You may face legal action, financial loss, and damage to your credit record from scams or unlawful removal processes.

6. Is it legal to remove the debt review flag without settling debt?
   No. As per the National Credit Act, the debt review status can only be legally removed after repaying all outstanding debts.

7. Why should I check my credit report after exiting debt review?
   To confirm that your status has been correctly updated and no errors remain on your credit record.

8. What should I do if I need help exiting debt review legally?
   Reach out to a registered debt counselling firm like Zero Debt for compliant guidance and support through the legal process.