Many consumers are not aware that they have recourse should they fall in arrears with their debt repayment or get blacklisted. Should you feel you are over-indebted, or you have received a section 129 notice, you should contact a debt counsellor without delay.

Process of debt review

Once the consumer has made contact with a debt counsellor, he/she provides the debt counsellor with statements from all his/her credit agreements, and completes a Form 16, which is an application for debt review. Within 5 working days of receiving the application, the debt counsellor has to notify all relevant credit providers and -bureaus that the consumer is under debt review.

Within 30 working days of receiving the application for debt review, the debt counsellor has to determine whether the consumer is over-indebted or not, and inform all relevant credit providers of the outcome of the assessment.

Before August 2009, a debt counsellor had to draw up a restructure proposal which got sent to the credit providers, who either accepted it, rejected it or sent a counter proposal back. As the debt review process only has 60 working days before a creditor can take legal action, this became a problem, as many applications fell outside the 60 day period which resulted in legal action. Also, going to court was seen as optional.

In August 2009, a declaratory order was obtained, which states that all cases where a consumer is found to be over-indebted, has to have judicial oversight. This means that as soon as the determination of over-indebtedness is made, a debt counsellor or lawyer must set the case down for a hearing in court. The implication of this is that, as long as the court date was obtained within the 60 working day period prescribed, creditors can not take legal action or repossess any assets in respect of any of the agreements included in the debt review.

In the interim, the consumer continues to pay the restructured amount to the credit providers. Again, debt counselling is NOT a payment holiday! YOU KEEP PAYING, albeit a reduced amount.

The consumer remains under debt counseling until all debts have been cleared, at which time he/she is issued with a clearance certificate and his/her name is removed from the credit bureaus. For the duration of the process, the counselor has to provide an after care and keep in touch with the consumer to find out how he/she is doing.

This process is designed to help consumers, without prejudicing credit providers, but it is a very fast process with no time to waste. It is therefore advisable that you have all your documentation relating to your credit agreements in order before you sign the application for debt review.

Further reading:

What is debt counselling?  

When should you seek debt counselling?

Strategies for wise borrowing

How to get out of debt


Copyright © 2010 Amelia Aitken

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