What is the Debt Councelling Process?

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The National Credit Act (NCA) came into effect in June 2007 and with it came the process of Debt Review or Debt Counselling.

The consumer applies for debt review at the debt counsellor or consultant. The consumer must know the debt review process and the fees that go with Debt Councelling. Debt review will influence the consumer’s credit rating, but this is temporary while the consumer is in debt review. The consumer can opt-out of debt review at any time.

The fees must be explained to the consumer so that he or she knows the cost. Debt counselling is not cheap and can be expensive, but is far better than losing your house or car to the sheriff of the court. Currently the economic market is so bad that you will only get 40% to 60% of market value for you car or house at an auctionet on.

The consumer completes and signs a debt review application form after consultation with debt counsellor or consultant. The form is called a Form 16. The form 16 with the supporting documents is handed over the the debt counsellor of consultant to start the process. All details must be completed on a form 16 so that the debt counsellor has the full picture. Personal details must be entered and well as a budget.

The budget is very important to the debt counsellor to determine if the customer is over indebt or not. Supporting documents are necessary to confirm account name, account number, address and creditor details with amount outstanding and monthly instalments and other important additions information needed to process the application.

The details on the form 16 are captured immediately. Within 5 days (normally sooner) all creditors are notified with form 17.1 that consumers is applying for debt counselling. The debt counselling application is now in progress. No legal action from creditor is now possible.

The debt review process takes 60 working days. The creditors have five business days to provide or confirm all the information on the in debt consumer. The debt counsellor will check the details he received from the consumer to see if the details are correct. The creditor is reminded to give feedback after five days.

Another 10 days grace is given to the creditor to reply to notice debt counsellor sent.

If the debt counsellor does not receive conformation from creditors, he may presume that the figure provided by consumer are correct. The debt counsellor will now determine if consumer is over indebt.

The debt counsellor will now prepare a debt-restructuring proposal to the creditors. 25 days from date of application the proposal must be sent to the creditors. All the creditors that received the notive have 10 days to respond to debt counsellors request. If the debt counsellor does not get response, the creditor will get a reminder and another 5 days to respond.

The proposal will be sent to the Payment Distribution Agency to start the distribution to creditors. That is the debt review process in a nutshell.

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