Entering the debt review process can be intimidating. After years of handling your own finances, you might now be reaching out to a relative stranger for advice on matters that will affect you and your family for years to come. You
are looking to this stranger to help you reduce your stress, and come up with a realistic way to handle your debt.
More than that, you are starting a process that you may not know too much about. What are some facts that you absolutely need to know about debt review?
- THE COURT MAKES THE RESTRUCTURING ORDER
A lot of people think that a Debt Counsellor interviews you, and then declare you to officially be ‘over-indebted’ and eligible to have your debts restructured by the courts. This is a common misconception, even some Debt Counsellors believed this to be true in the past.The reality is, that only a Judge, Magistrate or the National Consumer Tribunal (NCT) can declare you over-indebted, and only after they have reviewed your finances. Until this first step is completed, you are not officially over-indebted.
When a Debt Counsellor reviews your finances, they make a finding that you are most probably over-indebted (can’t afford to cover both debt obligations and monthly running costs at the same time). They are also likely to find that you will become over-indebted if your situation does not improve. Based on that finding, they are able to take your matter to court or the NCT for a ruling. The Judge or Magistrate can then use the Debt Counsellors proposal, or make their own ruling on how your debt should be restructured and repaid.
- CREDIT BUREAUS RECORD YOUR APPLYING FOR HELP
When you officially apply for help through a Debt Counsellor, they notify the National Credit Regulator (NCR) who in turn sends all credit bureaus the news that you have applied to have your debts reviewed. This information is then updated to your credit record.They are not recording that you have applied to have your debt restructured, only that you have asked a Debt Counsellor to review your debt (debt review).Credit bureaus will only remove this listing (that you applied for a review of your debt at some point in the past) once you have paid off all the debt you had at the time, and if a Debt Counsellor sends them specific official forms and documents. Until this time, they will keep that listing in place, even if you pay off all the debts.
- STATEMENTS MAY DIFFER
When you start debt review, credit providers will change how they deal with your account. Some are able to get their computers to immediately separate your debts, but others struggle to get their computers to keep accurate records.While in debt review, you may make use of a NCR recognized (and audited) Payment Distribution Agency (PDA) to handle your payments. They make your life so much easier to handle all the payments on your behalf. The PDA will send you a monthly ‘statement’ of what amount they paid to who, and when.It is important to realize that the PDA statement and the various credit providers’ statements may differ a little bit, or even a lot of the credit providers’ computers are outdated. Differences also creep in based on interest calculations, and the date payments reflect verse the date they are actually made.
- YOUR DEBT COUNSELLOR
When you enquire at a Debt Counselling practice, (like phoning a hospital), the person you first speak to might not be the Debt Counsellor (or Surgeon), that person is likely to be the receptionist, an administrative clerk or even a Debt Counsellors personal assistant.It is therefore wise to ask the person that you are talking to if they are registered with the National Credit Regulator as a Debt Counsellor. They won’t be offended, don’t worry! They will understand that you are just checking that you are getting advice from a qualified person, who has done specialized training and written an official exam about giving debt review advice. Always feel free to ask whoever you are talking to for their NCR registration number.
- LEAVING DEBT REVIEW
The goal of every debt review and debt restructuring court order is for the consumer to eventually pay off their debts, and leave debt review. What is important to realize, is that debt restructuring is a legal process with lots of legal requirements. It is not like short term contracts or subscriptions, you can’t just decide to walk away from the process.If a person under debt review suddenly decides to leave debt review, they cannot just stop paying their credit providers via their PDA and expect that their legal status will just revert to how it was before the debt review began. Likewise, credit providers can’t just decide that a person’s debt review is over, just because they say it is.If you would like to leave debt review because your situation has improved dramatically, then you should have a full consultation with your Debt Counsellor (not one of their staff) and discuss how long this is going to take. It may still take you a while, but the good news is that you will still benefit from debt review while paying off your debts sooner.
If you have any questions about debt review our experts are just a phone call or an email away.