What is Debt Review and Debt Counselling?
Debt Review can be summarised as a procedure where a person, who can no longer afford to meet all his monthly debt obligations, can apply with a debt counsellor to negotiate on his behalf with his creditors for reduced monthly repayments.
When a consumer applies for debt counselling, the debt counsellor will evaluate the customer’s financial position in order to determine if the customer is over-indebted, on the grounds of the information provided.
The debt counsellor will inform the consumer’s creditors that he has indeed applied for debt counselling. Creditors are then not allowed to take any legal action. The creditor must negotiate with the debt counsellor over the next 60 working days to determine a new repayment plan for the consumer.
Over-indebted means that the person does not have enough money left to meet his monthly obligations under all credit agreements, after all basic living expenses have been paid.
Should the debt counsellor determine that the applicant indeed appears to be over-indebted, he will commence with a procedure to inform all the customer’s relevant creditors of his conclusion.
The debt counsellor will then, on behalf of the applicant, enter into a process of negotiation with these creditors in order to negotiate reduced (more affordable) monthly repayments on behalf of the applicant.
The debt counsellor’s fee’s are currently capped at R6000 for an application, as well 5% commission on the amount paid each month. The consumer would also have to include the cost of legal fee’s which would vary on a case to case basis.
If the debt counsellor fails to submit proposals to credit providers or refer the matter to a tribunal or a magistrate’s court within 60 business days from the date of application, the debt counsellor will refund 100% of the fee already paid by the consumer.