Debt Counselling
Background:
The process of debt restructuring forms part of the terms and conditions of the new National Credit Act 34 of 2005, which came into effect on 1 June 2007. The main reasons for introducing debt restructuring as part of the Act are: (as quoted from Section 3 of the Act):
- providing mechanisms for resolving over-indebtedness based on the principle of satisfaction by the consumer of all responsible financial obligations
- providing for a consistent and harmonised system of debt restructuring, enforcement and judgment, which places priority on the eventual satisfaction of all responsible for consumer obligations under credit agreements.
What is a debt counsellor?
A Debt Counsellor is a person who successfully completed a formal Debt Restructuring training course and is registered as a Debt Counsellor with the National Credit Regulator (NCR). A registered DC will have a formal NCR-DC number that is issued after registration with the NCR. SA DEBTSAVERS currently contracts with te most successful Debt Restructuring firm with a proven backoffice function and systems. (More information available on request)
What is Debt Restructuring (Debt Review)?
The process of Debt Restructuring (also referred to as Debt Review) was developed to offer a solution to consumers who cannot meet their monthly obligations under all credit agreements, after all essential living expenses have been paid.
The process is part of the new National Credit Act, which came into effect on 1 June 2007, and applies to credit agreements entered into before and after that date.
Debt Restructuring (debt review) can be summarised as a procedure where a person, who can no longer afford to meet all his monthly obligations, can apply with a debt counsellor to negotiate on his behalf with his creditors for reduced monthly repayments.
When a person applies for debt restructuring, the debt counsellor will evaluate his financial position in order to determine if that person is *over-indebted, on the grounds of the information provided. The debt counsellor will also inform the person’s creditors that he has indeed applied for debt restructuring. The person’s creditors are then not allowed to take any legal action for a determined period (depending on the outcome of the evaluation - 60 business days if the person is found to be over-indebted).
*OVER INDEBTEDNESS: (Over-indebtedness means that the person do not have enough money left to meet his monthly obligations under all credit agreements, after all essential living expenses have been paid.)
Should the debt counsellor determine that the applicant indeed appears to be over-indebted, he will commence with a procedure to inform all the person’s relevant creditors of his conclusion.
The debt counsellor will then, on behalf of the applicant, enter into a process of negotiation with these creditors in order to negotiate reduced (more affordable) monthly repayments on behalf of the applicant.
The debt counsellor is allowed to charge certain fees as approved by the National Credit Regulator (NCR). These fees may be deducted from the monthly payments made by the applicant, if the procedure is successful.
What is required in order to apply for debt restructuring?
- ID-document(s)
- 3-Months’ bank statements
- Payslip (most recent)
- Most recent payslip if paid monthly
- 2 payslips if paid fortnightly
- 4 payslips if paid weekly
- Latest 3 months’ payslips (and/or commission statements if you earn overtime or commission)
- All the latest documents and/or statements pertaining to all debt obligations or –agreements entered into by you
- Any other documents, statements or information you might deem important or relevant
Monthly household expenses (make sure that you know the exact amounts deducted by debit order, for example payments for insurance, etc.)
Benefits of debt restructuring:
- Have one single monthly payment that you can afford.
- We negotiate with your credit providers on the repayment period as well as to reduce the fees.
- SA DEBTSAVERS have friendly and qualified experts who will listen to your situation and concerns and determine the best route for your financial future.
- Our Debt Counsellors will contact your credit providers on your behalf.
- Be debt free in a fixed period of time.
- Have peace of mind that you are dealing with the best company in the industry and with a good record.
Repossession of Vehicles
We can assist you to prevent the repossession of your vehicle(s).
As a result of the current economic climate a large number of vehicles are being repossessed every month. Consumers are struggling to keep up with repayments because of the ever increasing living expenses. Another factor which could be contributing to the burden on certain household budgets, is that a member contributing to the household income has been retrenched and now either unemployed or in a position where they are now earning substantially less.
Vehicle finance companies, such as Wesbank and MFC, are very aggressive in their attempts to collect either the outstanding arrears or the vehicle. It is very important to contact them before defaulting on payments. If you miss a payment and only then approach them afterwards for grace, they are not at all willing to settle for a new payment agreement.
As soon as you discover that you will not be able to make the next payment in full to the finance company, it is absolutely crucial that you contact them immediately. If at all possible, visit them personally. Explain your situation and then ask for a payment holiday. A payment holiday is when you ask the bank to only pay half of your normal installment for 3 to 6 months. They might even allow you to pay nothing for 3 to 6 months. Be honest about your situation and show intent that you are concerned about your debt owed to them and that you would like to rectify the situation as soon as possible. If necessary, give them an idea of your monthly income and expenses, and explain how this situation of being in difficulty to meet you financial obligation with them, came about.
You need to make sure you have a very good explanation why you need a payment holiday. Make sure that you are not still paying for luxuries, as this will not be accepted that you can afford luxuries, but is unable to meet your obligations. Ensure that you’ve worked out a proper budget, cutting down as much as possible on unnecessary expenses. You also need to tell them how you are planning to catch up with your installments, or you need to renegotiate the terms with your creditor, such as paying over a longer term. Don’t keep quiet, hoping the problem will disappear, it won’t and once you’re in arrears and haven’t made arrangements, you will have to hand over your vehicle losing all the installments already paid, and worst of all being without a vehicle. This is serious!
Word of advice: When working out a budget, consider what you really can absolutely not afford to live without, rather than what you would like to have. You need to make certain sacrifices to meet your debt obligations.
The repossession procedure of the creditor is quick when vehicles are concerned. After 3 months of non-payment nor any negotiation from your side, the creditor will want the vehicle or all of the arrears. They will hand your account over to a tracing agency or debt collector. The debt collector will call you to collect either your vehicle or the arrears in one lump sum.
By this time you must have a plan to pay the arrears as soon as possible. If the collector is not able to get the vehicle or the arrears from you, they will proceed with legal action. The creditor will then follow the legal procedure to collect vehicle via the courts with an attachment order.
You will have no other choice but to hand over the vehicle. All legal expenses will be for your account. The vehicle will be sold on auction and the proceeds will be deducted from your account. Most often, the vehicle will be sold for much less than the outstanding amount, which will result in a balance, still owed by you. You will, be liable to pay the balance immediately. You can negotiate with the creditor to pay this in installments. If you don’t come to agreement to pay it off, the creditor will get a second attachment order against any of your other assets.
Most people are waiting too long before they act to prevent the repossession of their vehicle(s). They hope that they will somehow manage to get the money from somewhere to pay the arrears and stop repossession. This very seldom happens and the problem is that the consumer is hoping that some miracle will happen before the realize that the writing is on the wall.
Your options become less when you wait too long. As soon as legal action has been taken or summons has been issued for a court order, you can no longer apply for debt restructuring. You need to apply for debt restructuring early enough so that the debt counsellor can negotiate with creditor. If you miss too many payments and then apply for debt restructuring, the debt counsellor will have a very difficult time to negotiate with creditors.
The payments you miss each month, will cause your outstanding account with the creditor to escalate at an unbelievable rate. Your account with creditors is becoming out of control, because compounded interest applies and it is working against you at a very fast rate! This is also why the creditors are fast to stop the ‘bleeding’ as soon as possible.
So, as soon as you suspect that you’re in financial difficulty, apply for debt restructuring early by completing the “contact-me-please” form so that we can be of assistance.
Repossession of Property
Prevent repossession of your property.
When property is being repossessed, the process is much similar, however the time period is somewhat longer. Reason being is that the risk to banks is less with property than with vehicles.
There are many people that fall behind with repayments on their mortgage bonds. For one month this is not a problem, should you be in a position, to catch up on the missed payment the next month. It becomes a serious problem if you miss more than one payment and you are unable to catch up. It is as if there is a new emergency every month and you cannot pay your arrears the next month. This is a sure sign that you are over indebted. Your budget is so tight that if there is a single emergency, it seems that you are never able to catch up. You are spiraling deeper and deeper into arrears debt.
The bank will be very willing to listen to you if you approach them in time, but this must be done before you miss any payment. Negotiating with the bank before missing on payments, will definitely put you in a much better position for them to agree on a grace period or even new terms on an extended period.
Waiting until you’ve already missed a payment, will already put you in breach of contract and you will find it very difficult, if at all possible to negotiate with the bank at this stage.
Usually the bank will be willing to grant you a payment holiday or renegotiate your contract if you do so pro actively. The bank can lower the percentage interest you pay or extend the period of repayment to decrease your monthly installment.
If the above does not help you, you will need to apply for debt restructuring without further delay before it becomes too late. As soon as the bank takes legal action in the form of a Section 129 letter, you have 10 days to apply for debt restructuring. If you have already received a summons, it is too late for the bond account to be included in debt restructuring. So you will be able to apply for debt restructuring for all other debt, but the house will not be included. You will have to pay the full installment on your house each month and apply for debt restructuring for all your other accounts.
To lose your house due to repossession can be very dramatic, upsetting your entire household, turning your whole world upside down. There are steps you can take to prevent this from happening to you and your loved ones.
Apply for debt restructuring as soon as you discover that you’re in financial difficulty. When you wait until the sheriff knocks at your door to repossess, it’s too late. Sent us an email with a 'please call me' and your telephone number. One of our dedicated consultants will contact you to help you and answer all you questions.
Debt Restructuring for Businesses and Companies
Debt Restructuring was intended to help over indebted consumers in their personal capacity and does not apply to businesses. This is bad news for business owners who have signed surety for their business in their personal capacity and are finding themselves struggling in their businesses in the current economic climate.
It seems unfair that small businesses was excluded from the NCA, because the person signing as surety for the company is actually the business owner. The business is only the legal entity used to trade with. Unfortunately this has been argued all the way to the Constitutional Court. However, the Constitutional Court still ruled that although the individual signed surety in personal capacity, this debt may not be included in debt restructuring.
When the company defaults on credit agreements, the creditor will not even summons the company. The creditor will pursue the person who signed surety and summons the individual directly.
What can the business owners do?
The business owner can still apply for debt restructuring by including all debt in his/her personal capacity. By paying less on personal debt, the business owner can free up some cash to channel funds to the business. The owner will not have to draw so much funds from his business to pay his personal monthly debt.
Don't delay make your call Today!
Should you need any assistance or any other service then complete the "Contact Me Please" form and one of our offices will contact you to assist.
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