Many of us cannot live without credit like credit cards, clothing accounts and loans. The availability and use of this credit (as well as the increase in interest and fees) and a failure to budget sometimes gets out of control resulting in over-indebtedness. If a debtor is over-indebted, s/he may apply for Debt Counselling in terms of the National Credit Act.
What is Debt Counselling?
It is when a debtor applies to our registered Debt Counsellor to request the rescheduling of his/her debt, as s/he is unable to pay all their obligations under all their credit agreements. It gives a debtor who is over-committed a second chance to repay their debt. Over-indebtedness does not result in the debt being written off, but being restructured.
Who can apply for debt review?
- Only 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?
- Upon approaching a Legal Counsellor, s/he must determine if the debtor is probably over-indebted. If there is a likelihood of over-indebtedness, the matter is referred to our Debt Counselling department.
- Our Debt Counsellor takes the final decision on whether a debtor is over-indebted – the Debt Counsellor may agree or disagree with the Legal Counsellor.
- The Debt Counsellor will decide on 1 of 3 outcomes:
- 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.
- The debtor is not over-indebted but has 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 Consumer 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 the Magistrate's Court can make an appropriate order.
- The debtor is over-indebted. The Debt Counsellor then recommends the Magistrate's Court to make an appropriate order such as rescheduling the debtor's monthly payments to creditors. 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.
Why use LegalWise’s Debt Counsellor?
- Our registered Debt Counsellor is trained to seek out the best possible outcomes for all parties involved and is more likely to get a positive response from the debtor's creditors as opposed to a debtor approaching his/her creditors.
- Once we have 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. We ensure credit providers follow and adhere to the correct procedure.
- Repayment of the debtor's debt obligations is through a payment distribution agency – an independent third party who monitors the repayments from the debtor to the creditors.
- Our Debt Counsellor will advise a debtor on ways to manage his/her living expenses through a budget drafted by the Debt Counsellor. A 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.
- We pay a Member’s attorney fees subject to our tariffs, whereas Non-Members will be required to pay a small fee to have their debt restructured.
Our LegalWise branches render Debt Counselling services to its Members and Non-Members. Please contact your nearest Branch for assistance or SMS DEBT to 43039.