Debt review: should you or shouldn’t you?

Even high-income earners are battling to pay all their debts and are starting to skip payments on important debts such as their home loans. Would debt review be the answer?

“To make it clear: debt review is not for everyone. However,, while some consumers may give debt review an immediate thumbs-down due to not fully understanding the ins and outs of the process, for others, it can be their last resort to avoid losing their car or home,” Wikus Olivier, managing director at CreditSmart Financial Services, says.

It is essential for over-indebted South Africans to understand and carefully consider the debt relief options, including debt review, to find the ‘perfect fit’ that can help improve their financial journey. Olivier says you should keep these considerations in mind regarding the debt review process:

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What is debt review?

Debt review is a legal process under the National Credit Act (NCA) and is regulated by the National Credit Regulator (NCR). The programme is specifically designed to assist individuals overwhelmed by debt and declared as ‘over-indebted’.

It offers a structured approach to debt management by restricting a consumer from taking on new debt while repaying existing debts.

Through this process, a registered debt counsellor assesses your financial situation and negotiates with your creditors (on your behalf) to create a manageable repayment plan based on your budget and affordability.

Debt review involves a single, lowered, consolidated monthly instalment spread over an adjusted term, providing a lifeline and debt relief for those who qualify, Olivier says.

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Who can benefit from debt review?

For someone overwhelmed by debt, but who still earns an income, it offers a way to manage your debts and cover essential living expenses. This may not be an option or solution for everyone to consider, Olivier says, but these factors will make you a ‘probable candidate’:

• You are experiencing financial hardship, struggling to make ends meet, not keeping up with living costs and multiple debts, or you are already in arrears with your credit accounts.
• You still receive an income or some form of income, for example, financial assistance and support from a family member.
• Debt review accommodates single and joint applications. In a traditional or community of property (COP) marriage type, where an estate is regarded as a joint estate, couples must apply for the process together. In marriages under an ante-nuptial contract (ANC), applicants may need to apply for a single or joint application, depending on their financial arrangements, such as joint bonds.

When debt review is not suitable for you

On the other hand, it will not be suitable for you if:

• You have insufficient debt and/or are not receiving enough income per month. It is crucial to ensure that the numbers align. If there is no tangible benefit, consumers might find themselves worse off. It is key to realise that debt review operates as a targeted debt relief solution.
• You are not prepared to bite the bullet you will not benefit from debt review’s designed purpose, one of the main reasons why the debt review process usually fails. “People tend to dispute the debt review process (they stop paying or do not complete it and want to get themselves ‘unflagged’ as being under debt review before their debts have been paid up) instead of challenging their creditors and those existing credit accounts,” Olivier says.
• You have debt-related judgements. Olivier says consumers who ‘play the ostrich’ and want to hide from their creditors to avoid legal action will not make it onto the debt review lifebuoy ring. You in fact still have a ‘consumer right’ opportunity (when they have lapsed on payments) to approach a registered debt counsellor for assistance within ten days after a Section 129 letter was issued by a creditor – a lifeline on a tray. In many cases, consumers fail to respond within ten business days of receiving the notice. If you have been in default with credit account(s) for twenty (20) business days already, your creditor(s) will indeed proceed to take or institute legal action against you.

Olivier says you must approach debt review and all available debt relief options with careful consideration. “It may not be a one-size-fits-all option but can indeed prove to be the ideal solution for someone in dire straits who wants to protect their assets and get instant financial relief.

“When it comes to debt review as an option, never say never. Various consumers have had their doubts about the process and yet so many have found it to be so much more than “just a helping hand”.

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