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So how does it work?

The process starts with your debt review application during which a debt counselling agency such as DebtSafe, will assess your financial situation to determine if you are over indebted.  If you are found to be over indebted, you will be able to enter the debt-counselling programme.

First off this will mean filling out an application form.  Once that is done and signed by you, a 60 work day protection period commences.  During this time, the law prohibits creditors to lay claim to any of your possessions, or continue with any other legal procedures against you.  This window period allows for the processing of your application, as well as for the negotiation and construction of your new, consolidated and reduced payment plan with all your creditors.  This process is undertaken in its entirety by your debt counsellor.

This is not always an easy task and can take time.  In the interim you must keep paying your creditors as much as possible in accordance with your payment plan.  In rare cases, despite much effort your creditors will not agree to the proposals and application will have to be made for a court to consider your financial circumstances and possibly force your creditors to accept less than they want. It’s important to note that the National Credit Act aims to create amicable solutions between consumers and creditors, and that the intention of the act is never to wilfully disadvantage creditors.

The Magistrate’s court where you work or live has jurisdiction/competence to hear the application for a debt re-arrangement order and your debt counsellor must bring an application for such an order as soon as reasonably possible.  The court order is required even where all your creditors have agreed to the payment arrangement as it means they cannot renege on or otherwise back out of the reduced payment arrangement.

The sad reality is that many consumers only apply for debt counselling when it’s too late.  Once an issue with a creditor passes a certain point, the debt counselling process no longer has any power and thus cannot extend you protection from repossessions and the likes.

In addition, it is important to remember that the programme does not erase your debt.  Instead, it allows you to pay it back to your creditors over a longer period and therefore have more financial freedom every month to pay for essential living items such as food and school fees. Subsequently, eligibility for the programme requires the applicant to have a monthly income.

The best way to find out if you qualify though, is to fill in the call back form on the right hand side and let a qualified counsellor call you back for a custom debt review.

The two greatest benefits of the debt counselling process is that the process is backed by the National Credit Act, which makes it compulsory for creditors to partake in the negotiations, and that it allows for a registered debt counsellor to facilitate the process between you and your creditors, working to put a new payment plan in place.  Your debt counsellor deals with your creditors directly, so you are able to answer the phone without worrying about who is on the other end of the line.

A third benefit is not having to pay the full monthly instalment due to your creditors.  A reduced payment arrangement is put in place allowing you to pay your creditors less on a monthly basis.  This makes paying your debt more affordable so you can get on with your life.

However – there are a few drawbacks: when on the debt counselling programme it might take you longer to get debt free.  Debt counselling works by decreasing your monthly payments and this means it will take you longer to pay off your debt.  This means that in the end, your debt will cost you more. A second drawback is that you are unable to get more credit while you are undergoing debt counselling and cannot make further use of your credit facilities. This however underscores a critical intention of the National Credit Act, namely to rehabilitate debt-ridden consumers by establishing healthy credit habits amongst them: it’s simply a case of spending what you have and no more.  And once you’ve practiced it for a while, it becomes a way of living.

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