Debt review, also called debt counselling, is a formal process under South Africa's National Credit Act for people who cannot keep up with their debt repayments. A registered debt counsellor assesses your finances and arranges a new repayment plan with your credit providers.
This article is general information. It is not legal, credit or financial advice. Rules and fees change, so confirm the details with the National Credit Regulator or a registered debt counsellor.
Who is debt review for?
It is for people who are over-indebted, which under the Act means you are, or will be, unable to meet all your credit repayments on time. You apply to a debt counsellor, who works out whether that applies to you. It does not cover every debt: an agreement a credit provider has already started enforcing may be left out, and debts that are not credit, such as a traffic fine, are not part of it.
How debt review works
- You apply. You give a debt counsellor your income, expenses and debts.
- Everyone is notified. The counsellor tells your credit providers and the credit bureaus that you have applied.
- The counsellor assesses you. If you are over-indebted, the counsellor proposes lower repayments your budget can carry, usually over a longer period.
- The plan is made binding. It is made binding by a magistrate's court order, or in some cases a consent order at the National Consumer Tribunal. A court can restructure the debt.
- You make one monthly payment. It usually goes to a payment distribution agent, which pays your credit providers for you.
What it means for your credit
Your credit record shows that you are under debt review, and you generally cannot take on new credit from the day you apply until the process ends. Keeping up with the plan matters: if you fall behind on it, a credit provider may be able to enforce its agreement again.
What does debt review cost?
Debt counsellors charge fees, usually taken from your payments, and the National Credit Regulator publishes fee guidelines. Ask for all the fees in writing before you apply, including any for the court process and the payment distribution agent.
How does debt review end?
Debt review usually ends when you have paid the debts in the plan. Your debt counsellor then issues a clearance certificate, and the debt review listing is removed from your credit record. A long-term home loan does not have to be fully paid first, as long as everything else is settled and you are up to date on the loan and able to keep paying it.
Leaving early is hard. Once you apply, you generally cannot withdraw on your own, and once an order is in place it generally takes paying the debts or a further court process. Before you apply, ask a counsellor what leaving would involve.
Debt review, restructuring and consolidation
Debt review is the formal legal process. It is one kind of debt restructuring, which can also be something you agree directly with a lender. Consolidation replaces several debts with one new loan. Each has different costs and consequences for your credit.
Questions to ask a debt counsellor
- Are you registered with the National Credit Regulator?
- What will the total fees be, and when do I pay them?
- What will my monthly payment be, and for how long?
- Which of my debts will this plan cover?
- What happens if I miss a payment?
- How would I leave the process, and what would that cost?
FinWise does not provide debt counselling and does not recommend a provider. To see how your own debts could be paid off, try the free debt payoff calculator.
