Debt Review (Debt Counselling)

By: Libertine Consultants  03-25-2010
Keywords: debt review cape town

Debt counselling [debt review] is a form of debt consolidation in that one payment is made for all creditors, but it is not a loan.  It is a process that has been created by the National Credit Act of 1995 and the process entails the following:

  • A Consumer who is struggling to maintain all his monthly payments will apply to a Debt Counsellor on a prescribed form [called a Form 16];
  • Once the Consumer applies for debt review, the Debt Counsellor must inform all the Creditors of this by means of a form called a Form 17.1, and the notifies the National Credit Regulator ["N.C.R."] of the application.  The Credit Bureaux receives notification of the application via the database of the N.C.R. and records this on their records;
  • Once the Creditor receives the Form 17.1 the Creditor may not proceed against the Consumer [unless the Creditor has already instituted proceedings by means of a Summons];
  • The Debt Counsellor will assess the Consumers application and determine whether or not the Consumer is over-indebted.  Generally speaking, a Consumer is over-indebted if the amount that he has left, after deducting his expenses from his nett income, is insufficient to cover all the required monthly payments of creditors.
  • If the Debt Counsellor determines that the Consumer is over-indebted, he notifies all Creditors of this by sending them a form called a Form 17.2;
  • The Creditors must reply to this Form by furnishing the Debt Counsellor a Certificate of Balance ["C.O.B."] on which must be indicated the current balance of the account, the current instalment due and the interest rate charged on the account;
  • The Debt Counsellor then draws a payment schedule in which he makes an offer to each Creditor.  More specifically, the Debt Counsellor will take the amount that the Consumer will have available - after his monthly expenses have been deducted from his nett income - and will make a recommendation on how this amount is to be distributed to all the Creditors;
  • The Creditors have the right to accept or reject the offer or make a counter-proposal.  If a reasonable counter-proposal has been made, the Consumer will be informed of this and may accept or decline the counter-proposal;
  • If any Creditor rejects the payment offer made, or a counter-proposal is rejected, the Debt Counsellor must approach the Court on Affidavit and request the court to make the recommendations made an order of court;
  • If all the Creditors accept the offer, the Debt Counsellor must also apply to Court on Affidvit and ask that the recommendations made be made an order of court with the consent of the Creditors;
  • Once the Court has made a ruling, it is binding on the Consumer and all Creditors who form part of the debt review.

For more information on the debt review process, please see our page.

Keywords: debt review cape town