As many South African consumers grapple with over-indebtedness, the fear of taking on debt review can often hinge on the unknown: how the process works, what it entails, and whether it is a viable solution.

Benay Sager, chairperson of the National Debt Counsellors’ Association (NDCA) said that the debt review process should be reasonably straightforward for the consumer.

Here is a breakdown of the debt review process:

Application

Get in contact with a registered debt counsellor via the NDCA website or by checking the list of registered counsellors on the National Credit Regulator’s website.

The counsellor will then give you a free telephonic debt assessment which will determine:

- how much debt you have

- how much of your monthly income you need to pay towards debt repayments

- whether debt counselling is a potential solution.

If it is, you can then decide to apply.

Protection

After you have applied, the debt counsellor will inform all of your creditors and the credit bureaus that you have applied for and are undergoing debt counselling, according to Sager.

"This should help to alleviate a lot of stress as creditors now need to deal directly with the debt counsellor and not you."

Negotiation

As part of the debt review process the debt counsellor will negotiate lower monthly payments on all credit agreements that fall under the National Credit Act (this excludes school fees and municipal rates).

Sager said that the restructuring of the debt repayments will be based on how much consumers can afford to pay back each month.

"It strikes the balance between your overall debt levels, how much you can pay each month, and what the creditors are willing to accept. Since it involves simultaneous negotiation with all creditors (in some cases up to 12 creditors), it is not something most people can easily do on their own," Sager said.

"Once these terms have been negotiated, the rearranged debt is approved by a court or the National Consumer Tribunal. This ensures the renegotiated rates are fixed for the duration of the debt counselling and creditors cannot change them or demand higher payments."

Payment

Consumers will make one affordable payment each month via debicheck to an independent payment distribution agency (PDA). The PDA will then distributes the money to creditors for the duration of the plan.

Keep in mind that the debt counsellor will nominate the PDA you will use.

The typical duration of debt review is between three and five years and depends on:

- the amount of debt

- the arrangements the debt counsellor can negotiate with your creditors

- what you can afford to pay.

If there is an improvement in your financial situation, you can increase the monthly payment or pay a lump sum to reduce the period or end the process.

Clearance

Once you have successfully completed the payment plan you will receive a clearance certificate which will confirm that all the accounts listed under debt counselling are paid up. This excludes home loans as they do not need to be fully paid but they must be up to date.

The debt counsellor will ensure that the credit bureaus receive the certificate.