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Debt Counselling

What is Debt Counselling?

  • The National Credit Act governs this process.
  • It is when a debtor applies to a Debt Counsellor to request the rescheduling of his/her debt as s/he is unable to satisfy in a timely manner all their obligations under all their credit agreements.
  • It gives a debtor who is over-committed a second chance of debt repayment.
  • Over-indebtedness does not result in the debt being written off.

Why does a debtor become over-indebted? 

  • Most people cannot live without credit and the use of credit sometimes gets out of control resulting in over-indebtedness.
  • There are various causes of over-indebtedness and the following are examples of causes contributing to over-indebtedness:
  • the availability of too much credit;
  • an increase in the cost of credit, for example interest;
  • reckless lending by a credit provider;
  • a high inflation rate;
  • emergencies that lead to loans like funerals, illness, job loss or divorce;
  • a failure to budget; or
  • a lack of financial discipline.

Who can apply for debt review?

  • Debtors who are natural persons (individuals) – juristic persons (companies) as debtors may NOT apply for debt counselling.
  • The debt review process is only available to a debtor who is over-indebted and has an income.
  • Couples who are married in community of property must apply jointly for debt review.
  • Couples who are married out of community of property can apply jointly if they have a joint debt.
  • Pensioners can also apply for debt review as pension is an income.

How does the debt review process work?

  1. A Legal Counsellor must determine if a debtor is probably over-indebted. If there is a likelihood of over-indebtedness, the matter is referred to a registered Debt Counsellor.
  2. ONLY a registered Debt Counsellor can decide on whether a debtor is over-indebted - the Debt Counsellor may agree or disagree with the Legal Counsellor.
  3. The Debt Counsellor will decide on 1 of 3 outcomes:
    1. The debtor is not over-indebted. The application is rejected where the debtor may go to Magistrate's Court and apply for an order to be declared over-indebted.
    2. The debtor is not over-indebted but does have problems paying his/her debts punctually. The Debt Counsellor recommends that the debtor and credit providers agree on a plan of debt arrangement. If they reach an agreement, it is filed as a consent order with the National Debtor Tribunal or a Magistrate's Court. If they do not reach an agreement, the Debt Counsellor makes a recommendation to the Magistrate's Court where it can make an appropriate order.
    3. The debtor is over-indebted. The Debt Counsellor then recommends to the Magistrate's Court to make an appropriate order such as rescheduling the debtor's monthly payments to creditors. 
  4. The creditors will be notified of this conclusion through a legal notice. This notice will give confirmation of over-indebtedness and the new repayment proposal will be sent to the creditors. It gives the creditors peace of mind that the debtor will keep to the new arrangement to pay each month and not skip or short pay on monthly repayments. This process is finalised as soon as the Magistrate makes the debt review application an order of court.

What are the advantages and disadvantages of debt counselling?


  • A registered Debt Counsellor corresponds with, and is likely to get a positive response, from the debtor's creditors when it comes to negotiating repayments as opposed to a debtor approaching his creditors.
  • Once a debtor has made an application for debt review, credit providers cannot attach any assets or take any further legal action against the debtor until a decision is finalised.
  • Repayment of a debtor's debt obligations is through a payment distribution agency - an independent third party who monitors the repayments from the debtor to the creditors.
  • A registered Debt Counsellor will advise a debtor on ways to manage his/her living expenses through a budget drafted by the debt counsellor. The Debt Counsellor will set aside a certain amount of income for the debtor's necessities such as food, school fees, transport costs etc, and the remainder of the money is left to pay the debtor's debts.
  • LegalWise pays the Member's attorney fees subject to our tariffs, whereas non-members will be required to pay a small fee to have their debt restructured.


  • A debtor will not get access to credit whilst under debt review, which includes new financing for a home and/or a motor vehicle. A clearance certificate must be issued first. While this may seem to be a negative aspect, the prevention of further credit will protect a debtor from becoming more indebted, and it will protect credit providers from being accused of "reckless lending".
  • If a debtor misses a payment under debt review, the creditors may terminate the debt review process and proceed with legal action.
  • The debtor may have to open a new bank account if the Debt Counsellor requests this.

PLEASE TAKE NOTE: LegalWise Branches render debt counselling services to its Members and non-members. Please contact your nearest Branch for assistance.


  • CLEARANCE CERTIFICATE: a certificate that is issued to the debtor once s/he has paid all their debts. The debtor's name will then be removed from the credit bureau as being under debt review.
  • RECKLESS LENDING: means failure by a credit provider to conduct a credit assessment of the debtor as required by the NCA; or an assessment was undertaken but upon entering into an agreement with a debtor, s/he did not understand or appreciate the costs, risks, and obligations of the credit agreement, or entering into an agreement made a person over-indebted.

How can LegalWise help you?

If you are over-indebted your Legal Counsellor will refer you to our registered in-house Debt Counsellors who will assist you with your application of restructuring your current debt.

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