Debt review explained

Who it is for

Debt review, also called debt counselling, is set out in section 86 of the National Credit Act. It is for consumers who are over-indebted, meaning their income is not enough to pay their credit agreements on time. It covers credit such as personal loans, credit cards, store accounts, vehicle finance and home loans, but not debts like municipal rates or SARS.

How the process works

• You apply to a debt counsellor registered with the National Credit Regulator and give details of your income, expenses and debts.
• If you are over-indebted, the counsellor notifies your credit providers and the credit bureaus that you are under debt review.
• The counsellor proposes a restructured plan: lower instalments, often with longer terms and lower interest rates.
• The plan is agreed with creditors and made an order of the court or the National Consumer Tribunal.
• You pay one amount each month to a payment distribution agency, which pays your creditors.

What it costs and what it means

Debt counsellors charge fees set by guidelines from the National Credit Regulator, and most of the cost is built into your monthly payment. While you are under debt review you cannot take on new credit, and creditors cannot take legal action to enforce the debts in the plan as long as you keep paying. The flag on your credit record warns lenders that you are in the process.

Getting out

When you have paid all the debts in the plan, except a home loan if you have one, the debt counsellor must issue a clearance certificate, and the debt review flag is removed from your record. Leaving early is only possible in limited cases, for example if a court finds you are no longer over-indebted.

Alternatives

Before applying, it is worth speaking to your creditors directly, cutting spending with a budget, or using a cheaper consolidation loan if you still qualify for one. Debt review is a serious step that usually lasts several years, but for many people it is a way to stop collection calls and repay what they owe.

Frequently asked questions

Will I lose my car or house?

Not if they are in the plan and you keep up with the restructured payments. If you stop paying, creditors can apply to end the review and enforce their agreements.

How long does debt review take?

It depends on your debts and what you can afford. Plans of three to five years are common.

How do I check that a debt counsellor is registered?

Search the register on the National Credit Regulator’s website. Only registered counsellors can place you under debt review.

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