For many South Africans, overwhelming debt feels like a trap. The stress, the constant calls from creditors, and the fear of losing your assets can take over your life. There is good news. A legal and structured solution exists to help you take back control. This solution is called debt review, often known as debt counselling. Established under the National Credit Act of 2005, this process offers a clear path toward financial freedom.
This guide explains the practical steps of debt review, using the official framework from the National Credit Regulator and the National Credit Act.
What is Debt Review and How Does it Protect You?
Debt review is a formal legal process. It helps over-indebted consumers by restructuring their debt payments. The National Credit Act created this powerful tool to promote responsible lending and protect consumers, and its implementation is guided by specific debt counselling regulations.
The main benefit of applying for debt counselling is immediate legal protection. Once you apply with a registered debt counsellor, they notify your credit providers. From that point, those providers cannot start or continue any legal action to enforce your credit agreements as per Section 86 of the National Credit Act 34, of 2005. This crucial step stops the harassment. It gives you and your counsellor the space to work on a sustainable new payment plan.
Debt Review Eligibility: Do You Qualify?
Your first step is to see if you qualify. You can apply to a debt counsellor to be declared over-indebted according to Section 86 of the National Credit Act 34 of 2005.
Over-indebtedness is the key requirement. After accepting your application, the debt counsellor must determine if you appear to be over-indebted. This means your current income is not enough to meet all your credit agreement payments on time. It is helpful to understand the general debt review guidelines, which clarify this assessment process.
Act quickly if you are struggling. You cannot apply for debt review on a specific debt if the credit provider has already taken legal steps to enforce that agreement through the court.
The Step-by-Step Debt Review Process
The debt review process follows a clear legal framework to ensure transparency and protection.
1. Application and Assessment for Debt Counselling
You start by applying to a debt counsellor in the correct way. The debt counsellor will then:
- Give you proof they received your application.
- Notify all your credit providers and the credit bureaus.
- Conduct a full assessment of your financial situation.
You and your credit providers must cooperate with the debt counsellor’s reasonable requests. Everyone must negotiate in good faith for a responsible debt management plan.
2. Proposal and Court Referral in Debt Review
If the debt counsellor finds you are over-indebted, they will write a proposal. This proposal recommends that the Magistrate’s Court make an order to re-arrange your obligations. This re-arrangement can involve:
- Extending your loan term to lower monthly payments.
- Postponing payment due dates.
If the counsellor finds you are not over-indebted but are in financial difficulty, they may suggest a voluntary plan. If you and all credit providers accept this plan, it can be filed as a consent order.
3. The Magistrate’s Court Order for Debt Management
When a proposal goes to the Magistrate’s Court, the court will hold a hearing. The magistrate will consider the proposal and your circumstances. According to Section. 87 of the National Credit Act 34 of 2005, the court can then make a legal order to re-arrange your obligations. This court order enforces your new, affordable payment plan, giving you long-term relief.
How Debt Review Affects Your Finances and Life
Entering debt review has important effects on your life, most of them positive for someone who is over-indebted.
Monthly Payments and Interest Rates in Debt Counselling
The main goal is to reduce your monthly debt payments to a manageable amount. The court order typically extends your repayment period, which lowers each instalment. Your debt counsellor will also negotiate with credit providers to reduce your interest rates. This makes the overall debt management plan more affordable.
The Costs and Fees of Debt Review
The NCR regulates debt counselling fees to protect you. The fees usually include:
- Application Fee: A once-off fee, limited to a prescribed amount.
- Restructuring Fee: This is the lesser of your first new instalment or a maximum of R8,000 (excluding VAT) for a single application. For a joint application, the maximum is R9,000 (National Credit Regulator, 2011).
- Monthly After-Care Fee: This is 5% (excluding VAT) of your monthly instalment, capped at R400 (excluding VAT) for the first 24 months. It reduces after that period as directed by the National Credit Regulator in 2011.
These regulated fees keep the process fair and accessible
Your Credit Score and New Credit During Debt Review
While under debt review, your credit profile will show you are in the process. You must not take on any new credit. This rule is temporary. It prevents you from falling deeper into debt. Once you finish the process successfully, this listing is removed. You can then start rebuilding your credit score.
The Long-Term Goal and Exit Strategy of Debt Review
The final goal is financial freedom. The process ends when you have paid all the obligations under the court order, except for a mortgage agreement.
Your Clearance Certificate from Debt Counselling
After you settle all restructured debts (excluding the mortgage), your debt counsellor issues a clearance certificate. They send this to all credit providers and bureaus. The certificate instructs them to update your credit record to show you are no longer under debt review. This is the final step. It marks your fresh financial start.
How to Avoid Termination of Your Debt Review
You must stick to your new payment plan. If you miss payments, a credit provider can give notice to terminate the debt review. However, a provider cannot terminate if the matter is already with a court or the Tribunal. Adhering to the established debt management framework is crucial for maintaining the protection. If a provider tries to enforce the agreement after termination, the court can order that the debt review resume under fair conditions. To succeed, use the good financial habits you learn during your debt management journey.
Your Next Step on the Path to Financial Freedom
The journey out of debt is significant, but you do not have to walk it alone. Debt review is a powerful, legal solution that provides protection and a clear plan.
DebtMap is a professional debt counselling company. We are one of the fastest-growing and most innovative in South Africa, recognised as a Top 5 large debt counselling company. Our expert team provides the guidance you need to navigate the National Credit Act and NCR guidelines.
To receive expert advice on how you can apply for debt review and start your journey to financial freedom, contact DebtMap today.
References
- National Credit Act 34 of 2005. (2005). Available at: https://www.gov.za/documents/national-credit-act.
- National Credit Act 34 of 2005. (2005), Section 86 (Application for debt review). Available at: https://lawlibrary.org.za/akn/za/act/2005/34/eng@2021-06-30/provision/chp_4
- National Credit Act 34 of 2005. (2005), Section 87 (Magistrate’s Court may re-arrange consumer’s obligations) *. Available at: https://lawlibrary.org.za/akn/za/act/2005/34/eng@2021-06-30/provision/chp_4__part_D__sec_87 .
- National Credit Regulator. (2011) Debt Counselling Fee Guidelines. Available at: https://ncr.org.za/documents/pages/registration&compliance/debt_counsellors/Updated%20Fee%20Guidelines%20for%20Debt%20Counsellors.pdf.
