Understanding what debt review is, why it exists, and when you should consider it
Over the last two weeks, we looked at what Debt Review IS and what it is NOT.
In Part III, the final part of this series, we look at other important concepts you need to understand when it comes to this thing called “Debt Review”.
When should I consider debt review?
You should contact a debt counsellor when:
You think you are going to be unable to pay your debt instalments.
You are already in arrears with one or more of your debt instalments.
When you receive a Section 129 notice from your credit provider.
A Section 129 notice allows a consumer 10 business days to pay amounts in arrears or apply for debt review. However, once the credit provider starts legal action, debt review is no longer an option on that account. So, if you receive a Section 129 notice, you must urgently contact a reputable debt counsellor like ZenMunni who can begin the debt review assessment process for you.
Do I qualify for debt review?
The following are necessary to qualify for debt review:
A debt counsellor must have concluded that you are overindebted.
You need to have a regular monthly income (this includes a pension).
If you are married in-community of property or with an antenuptial contract with accrual, both you and your partner must go into debt review together.
How do I get out of debt review?
Generally, once in debt review, the best way to get out of debt review is to pay off the debts. There are a few other ways which we deal with below.
Pay off faster
A consumer in debt review is not restricted to paying the minimum amount. If financial circumstances improve the debts can be paid off faster, which is what we recommend. The sooner you get rid of unnecessary debt the sooner we can help you start building your wealth by saving and paying yourself!
Once the debts are paid off a debt counsellor will issue a Clearance Certificate which is provided to credit bureaus who then remove the “debt review” flag allowing a person to resume normal credit consumer activity, if they so wish.
Even if a consumer is not able to pay off faster, once they have finished paying off their debts, they are in a great place! The discipline of paying off debt teaches us about good and bad credit, how to better manage our day-to-day finances, and most importantly it prepares us to save and build wealth, as we know how to commit to and honour a monthly instalment.
Once a consumer is finished paying off their debt, we encourage them to take all, or some of the amount they were paying off and invest it in tax-efficient investment plans. But doing this they begin investing in themselves, building their own wealth instead of building wealth for banks and other credit providers.
Make a court application
If a consumer believes that their circumstances have improved but they have not completed paying off their debts under debt review, they can approach the court again. This will involve appointing an attorney and legal fees, which are expensive for the average consumer, but it is a solution if the consumer is in a better place and wants to exit debt review. The consumer and their attorney will still need to show the magistrate that the consumer’s financial situation has improved and that the debt obligations will be met if removed from debt review.
Default
Another way to get out of debt review is to default on your debt review arrangements. Defaulting means that you don’t make your scheduled debt review payments. However, this is obviously not recommended. Defaulting will result in your creditors “terminating” the debt review process and they will likely apply for your sequestration (bankruptcy – we dealt with this in Part II of this series). This is clearly not a desirable outcome.
And that brings us to the end of this series of blogs focusing on debt review. If you have any questions, please send them to us and we will gladly respond to you.
If you are struggling with too much debt and believe Debt Review may be for you, call us at 087 183 5012 or WhatsApp us at 076 451 6944 or email us at info@zenmunni.co.za. We are registered with the National Credit Regulator and we will partner with you in the debt review process and help you to graduate from debtor to investor so that together we can improve your finances.
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