Professional Debt Counselling
Focus on your goals. We’ll guide you out of debt.
You are One step closer to being debt free!
The Process
Complete our online debt assessment form and provide us with the details of your financial situation.
Your Debt Counsellor determines whether your monthly expenses and debt exceed your monthly income.
We’ll inform all your Credit Providers and the Credit Bureaus that you are under Debt Review.
We’ll restructure your payment plan and negotiate with your Credit Providers.
Your repayment plan becomes a court order. All you need to do now is make regular payments on the new plan.
Debt Counselling under the national Credit Act
Debt counselling is a key consumer protection mechanism under the NCA, designed to assist over-indebted consumers in managing and restructuring their debt.
Key points
- Process:
- Consumers can apply for debt counselling through a registered debt counsellor.
- The counsellor assesses the customer’s financial situation to determine if they are over-indebted.
- If over-indebted, the counsellor negotiates with credit providers to create a restructured repayment plan that is affordable for the consumer.
- Consumer benefits:
- Prevents legal action from credit providers (e.g., repossession or garnishee orders) while under debt counselling.
- Offers a pathway to settle debts without resorting to reckless spending or further borrowing.
- Regulation: Debt counsellors must be registered with the National Credit Regulator (NCR) and adhere to strict guidelines to ensure fair treatment.
- Outcome: The process aims to help consumers become debt-free over time while ensuring creditors are repaid in a manageable way.
Debt Restructuring
Debt restructuring is a financial process designed to modify the terms of existing debt obligations to make them more manageable for a borrower who is struggling to meet repayments. It is often used under the National Credit Act (NCA).
What is Debt Restructuring?
Debt restructuring involves renegotiating the terms of a borrower’s debt agreements with creditors to create affordable repayment plans and avoid severe financial consequences like bankruptcy or asset repossession. It aims to balance the borrower’s ability to pay with the creditor’s need to recover funds.
Key Points
- Adjustment of Terms:
- Lower Monthly Payments: Extending the loan term to reduce monthly installments.
- Interest Rate Reduction: Negotiating lower interest rates to decrease the overall cost of debt.
- Debt Consolidation: Combining multiple debts into a single loan with lower interest rate or extended term.
- Payment Holidays: Temporary pauses on repayments to provide short-term relief.
- Partial Debt Forgiveness: In rare cases, creditors may agree to write off a portion of the debt.
- Process in Debt Counselling:
- A registered debt counsellor assesses the consumer’s financial situation to confirm over-indebtedness (as defined by the NCA)
- The counsellor proposes a restructured repayment plan to creditors, which may involve reduced payments or extended terms.
- The plan is submitted to a court or the National Consumer Tribunal for approval, making it legally binding.
- Consumers make payments to a Payment Distribution Agence (PDA), which distributes the funds to creditors.
- Goals:
- For Consumers: Avoid legal action (e.g., repossession or garnishee orders), reduce financial stress, and work toward becoming debt-free.
- For Creditors: Recover outstanding amounts over time rather than writing off the debt entirely.
Benefits
- Affordability: Aligns repayments with the consumer’s income and living expenses.
- Legal Protection: Under debt counselling, consumers are shielded from creditor harassment or legal action while the plan is active.
- Financial Recovery: Provides a structured path to regain control of finances without resorting to further borrowing.
- Credit Preservation: Helps avoid severe credit damage compared to sequestration or default.
Limitations
- Credit Restrictions: While under debt counselling, consumers cannot access new credit until the process is complete.
- Time-Intensive: Restructuring may extend repayment periods, meaning it takes longer to become debt-free.
- Costs : Debt counselling involves fees for the counsellor and PDA, though these are regulated by the National Credit Regulator (NCR).
- Commitment Required: Consumers must adhere strictly to the repayment plan to avoid termination of the process.
Example Scenario
A consumer with R100 000 in debt (e.g., credit cards, personal loans) struggles to pay R5 000 monthly due to high interest rates. Through debt counselling:
- The debt counsellor negotiates to extend the loan terms and lower interest rates.
- The new plan reduces the payments to R2 500 monthly, fitting the consumer’s budget.
- Payments are made via a PDA, and creditors agree to the plan, halting legal action.
Legal Context
Under the NCA, debt restructuring is a core component of debt counselling, regulated by the NCR to ensure fairness. The process is formalized to protect consumers from reckless lending and help them avoid over-indebtedness while ensuring creditors receive payments.
