What is Debt Review?
Debt review is a process that gets implemented to protect consumers against the repercussions of not paying their debt on time, or not being able to do so. Primarily it protects these individuals from credit providers.
The National Credit Act of 2007 protects thousands of people each year and was initially created to help consumers not only repay their debt or protect them, but also allow them to bounce back from their financial troubles. Debt review thus places individuals that cannot afford their debt installments, in such a position that they can repay whatever they can afford, all while maintaining their living expenses each month. During a debt review, consumers also don’t have to worry about the stress of any credit provider or financial institution contacting them or sending them notifications to comply with payments.
Debt review is supported by many laws and regulations, which all form part of the National Credit Act. This act is the only one that supports home loans, along with its debt preferences.
If a consumer chooses to be placed under debt review, he/she will receive a lot of benefits regarding their financial situation, which also includes the protection, and guidance that comes along with it.
How Does Debt Review Work?
Simply put, debt review is a legal process, that provides consumers with the necessary legal protection they need, to ensure their financial sustainability, during the process of repaying their debt. It also provides credit providers with a simple collection method, which also benefits them, by knowing that most or at least some debt will be paid, and not written off, resulting in the creditors’ loss. Creditors are thus more likely to agree to lower interest rates and installments when a consumer is placed under debt review, as it provides both parties with a solution.
A debt counselor gets assigned to the consumer that needs to be placed under review and negotiates on behalf of him/her and determines the adequate amount required to be repaid to credit providers. This entire process also allows the consumer to afford their debt, while at the same time being fair towards the credit providers.
When it comes to negotiating with creditors, the debt counselor will work towards reducing the consumers’ monthly installments/ payments, with all creditors, and propose new and extended payment terms.
It protects the consumer by allowing him/her to have enough funds each month to cover their expenses, which is the initial reason why most consumers request to be placed under debt review.
Once negotiations have been concluded, an order rearrangement will be issued, to restructure the scope of the proposed offer amount. A copy of this order will be issued to credit providers, all of which should adhere to the granted court order.
What are the Benefits of Being Placed Under Debt Review?
The number one and most important benefits you’ll receive is protection from those you owe debt to.
Within the first 60 days of your application, credit providers are not eligible to take any legal action against you. You, as the consumer, will be fully protected by the review.
The debt counselor assigned to your case will request a court date, to ensure you are protected during the period of the court application, to obtain a court order. Once your application gets accepted, creditors won’t be allowed to continue with legal action, during the time that payments get made.
Another benefit is that, when you are placed under the National Credit Act, regardless of any credit agreements, service providers will still accept the process. If, however, they choose not to comply, financial provision will still be granted to accommodate one’s outstanding payment, which means, you benefit either way.
What Does it Mean When Legal Action has been Taken Against You, Before a Debt Review?
In the event of legal action being taken against you, before applying, it will be impossible for the relevant account to be included in the debt review.
It is yet another reason why consumers should seek financial assistance, in the case of experiencing financial trouble or failing to pay their debts, as it will help prevent credit providers from taking legal action against them.
When Should You Consider Applying for a Debt Review?
You should view the process of being placed under debt review as a positive means of trying to eliminate your debts effectively, without having to worry whether you’ll still be able to afford your living expenses. If you find yourself in a situation of not being able to afford your debt and living expenses together, you should apply for a debt review as soon as possible.
You should especially try to apply before any legal action being taken against you. Creditors have a responsibility to provide you with your consumer rights, according to the 129 of the National Credit Act, and especially emphasize the right to get a debt counselor, to present you and guide you on how to manage your debt. Once the consumers get informed, they have ten business days to contact a debt counselor, before legal action is taken against them.
If ever you receive such a call or predict that you won’t be able to repay your debt, you should also contact a debt counselor and apply for a debt review. You should also note that you should not access any more credit until your case has been resolved.
Can You Exit a Debt Review at any Time?
No, you can’t. You may only exit the debt review and be provided with a clearance, in the event of having your unsecured debt, as well as your home loan payments, paid up to date.
You are also allowed to exit a debt review, if you can prove to the court that your finances have improved and that you can continue repaying your creditors, without a debt counselor.
If placed under debt review, you as the consumer can’t stop making payments, as this will result in legal action being taken against you immediately.