What you need to know about debt review in South Africa

Debt review can change your life. It can help you organise your debt and structure payment plans that are manageable and achievable, says Hans Overbeek founder and chief executive officer of Cyber Finance.

“Starting the process of debt review shows that you’re taking control of your finances and want to start living your life debt-free. Debt review isn’t a blip on your record, it’s a step to financial freedom,” he said.

To make the process easier, Cyber Finance has provided answers to frequently asked debt review questions, so that you know what to do and what not to do when in debt review.

Let’s start with the basics — what is debt review? 

Debt review is a formal debt rehabilitation program that seeks to help consumers who are genuinely struggling to generate enough income to make ends meet.

If you are under debt review, it means you have appointed a debt counsellor who has deemed you over indebted and in need of a structured repayment plan.

The debt counsellor will communicate directly with your credit providers to negotiate interest rates and repayment terms with the aim of reducing them.

Once your payment plan is finalized and approved, you will be able to start systematically paying off your debt in agreed upon instalments.

Can I skip a payment in debt review? 

You cannot miss any payments once you have settled and finalized your repayment plan. If you miss a payment, your entire payment plan will be annulled.

For your debt review to be successful, you need to stick to every monthly payment in your repayment plan so that you don’t put your debt review agreement at risk.

Can I apply for new bank services while under debt review? 

You won’t be able to apply for bank services that allow you to borrow money from the bank or other registered credit providers. For example, you won’t be allowed to apply for a new credit card while in debt review and using your existing credit cards while still paying off existing debt will put you at more risk of having your debt review programme terminated.

You also can’t apply for a legal, registered loan from the bank or any registered credit providers while under debt review.

The aim when seeking debt review is to settle all of your current debts as best you can. Therefore, incurring further debt while settling your existing payments is strongly discouraged.

Can I set up a business while under a debt review?

While you are under debt review, your main focus should be to get yourself in the green. While you will technically be able to set up a business, you won’t be able to apply for a business loan from the bank or borrow money from any registered credit providers.

Setting up a business while you are still personally in debt may result in long-term cash flow problems and could result in bankruptcy. While in debt review, you should avoid incurring more debt at all costs and work towards being debt-free as quickly as you can, so that you can move on with future projects.

Can I pay my creditors directly while under debt review?

You can work directly with your credit providers if you are having a short-term cash flow problem and you reach an agreement in writing with them to start paying off your debts.

However, if you are over-indebted, it is advised that you seek debt counselling to help you set up your debt review repayment plan as you will most likely be indebted to more than one credit provider.

Debt review will also help to avoid any legal complications, as when you are officially under debt review, you have a 60-day grace period in which legal action cannot be taken against you and if you stick to your repayment agreement, your credit providers cannot make legal threats.

Will debt review remain on my credit record?

Unlike blacklisting, debt review does not stay on your permanent credit record. Once you have completed your debt repayment plan, it will be removed from your permanent record and won’t affect your future financial plans.

What happens if I can’t pay my full debt review?

If you can’t honour your debt repayment plan by falling short on your payments or not paying them at all, your credit providers will start taking legal action. This should be avoided at all costs.

The debt review process is a lifeline. You are afforded the opportunity to pay a negotiated, affordable amount every month which guards you against legal action and repossessions.

Legal action can result in you losing all of your assets — even your home. You should do everything in your power to honour your repayment plan while in debt review, so that you save you and your family unwanted stress and hardship.

“Before entering into debt review, make sure you understand the process. You need to know what is expected of you once you sign your repayment plan agreement, so that you don’t put your personal finances at risk,” said Overbeek.

Read: SA consumers are borrowing money to pay back their debt

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What you need to know about debt review in South Africa