The Debt Counselling Process

The Debt Counselling Process outlined in the National Credit Act relies on several key sections.

This is how the sections interact with each other

Section 129 provides that a credit provider may not commence legal proceedings until they have given the consumer notice that they may approach a debt counsellor (“DC”), alternative dispute resolution agent, consumer court or ombud with jurisdiction.

Section 86(1) provides that a consumer may apply to a debt counsellor to be declared over indebted

Section 86(2) provides that this application for debt review does not apply to a credit agreement where legal steps have been taken to enforce the agreement

Section 86(4) provides that the DC must notify all credit providers listed in the application and every registered credit bureau

Section 86(5) requires that the consumer and every creditor must comply with the DC’s reasonable requests and participate in good faith

Section 86(7)(a) provides that the DC may either declare the consumer over indebted or reject the application

Section 86(7)(b) provides that even if not over indebted the DC may recommend a voluntary plan of debt re-arrangement;

Section 86(7) (c) provides that the DC may seek an order from the magistrates court  that the consumer’s obligations be re-arranged

Section 86(8) provides that a DC may file a voluntary plan of debt re-arrangement as a consent order or refer the matter to the magistrates court for determination

Section 86(9) provides that a consumer may approach the magistrates court if their application is rejected by the DC

Section 86(10) provides that a credit provider may give notice to terminate the debt review at any time 60 business days after the consumer applied for the debt reveiw

Section 86(11) provides that despite giving notice of termination the magistrates court may order that the debt review continue.

Doing it yourself

The National Credit Act does not insist that you use a debt counsellor. You are free to work out how much you owe and come up with your own repayment plan.  Many credit providers will be far happier dealing with you than with a debt counsellor and so long as you take care and only agree to pay an amount you can afford, this is an acceptable alternative to formal debt counselling.

Registered debt counsellors will generally advise you to make use of their services for the following reasons: they are required to investigate whether an agreement was concluded recklessly; they take they trouble out of having to organise the payment arrangement; they are able to negotiate a better deal for you; they will take care of the monthly distributions; etc..  While this is largely true, debt counselling costs money and you will save at least 5% of the likely minimum monthly distribution costs that debt counsellors may be allowed to charge in the future.

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