Debt counselling is a debt relief mechanism for over-indebted consumers. A consumer can seek the assistance of debt counselling on his or her own, or he or she might be referred to a debt counsellor by a credit provider, the court or the NCR.
The main purpose of debt counselling is to:
• Assess a consumer’s state of indebtedness;
• Facilitate debt re-arrangement with credit providers; and
• Make recommendations to credit providers and/or magistrates courts on behalf of overindebted consumers.
The NCA created a new profession: debt counsellors and provided an intervention for overindebted consumers. The function, role will be discussed below.
The debt review process should take 60 business days. The debt review
process of 60 days can be divided into three (3) stages:
- Review the consumer’s information provided by the consumer himself, credit providers, and credit bureaus, and make a determination of over-indebtedness or reckless credit; then
- Rearrange the consumer’s financial obligations based on what they can afford to pay, but that will still pay creditors in a timely fashion, and make an offer to creditors; and
- Restructure the consumer’s accounts accordingly, based on what was accepted by creditors, or their counterproposals, and submit this to the court for a final decision. Once the court has agreed, this restructured plan is sent to the PDA (Payment Distribution Agent/s) for payment purposes. These cascading payments are then reviewed regularly by the debt counsellor, and if necessary rearranged and
restructured again if needed.
This is then followed by after care and monitoring the consumer’s progress towards rehabilitation.
Consumers should always be made aware of the negative consequences associated with the inability to repay credit. They need to be made aware that they must have enough money available to repay obligations under debt agreements. The effect on the consumer’s credit record and other affairs should be explained.
When the debt counsellor and consumer first meet there is an informal discussion of the circumstances that has brought the consumer to this point. These reasons are important as they need to be supplied to a magistrate when the matter is brought before the court. The purpose of this consultation is to get more information or clarification about the application of the consumer and to determine if debt restructuring is an option. There will also be a high-level calculation of
over-indebtedness done.
Debt Counselling is a skill it will have an impact on your life, you should always ask to speak to the debt counsellor who is managing your affairs or potentially managing your affairs and ask them questions.