A person is referred to as insolvent when their liabilities exceed their assets, and you cannot pay your debt when they are due. An insolvent estate comes into existence when the insolvent person's estate is under sequestration. Declaring insolvency as an individual in South Africa entails a legal process whereby you apply to court to be declared bankrupt. As part of the process, you surrender your estate, and a court-appointed trustee/curator oversees the sale of assets and distribution of proceeds to the creditors. The trustee arranges the writing up of the assets to be included in the estate and sale. In addition, the trustee meets with the creditors.
When under debt review, you do not have to surrender your assist.
What is debt review in South Africa?
Debt review is a legal option for South African citizens that are over-indebted and find themselves not able to meet their monthly commitments. This process has been uniquely tailored to assist people in our unique country. When you apply for debt review a debt counsellor approaches your creditors and makes payment arrangements on your behalf, with the core goal of their engagement with creditors to lower your monthly payments to a more accessible amount. You then pay one lower monthly payment to a payment distribution agency - which will redistribute your funds to all your creditors. Debt review was developed by the NCR and is part of the National Credit Act 34 of 2005 and the National Credit Amendment Act 19 of 2014. The National Credit Act offers debt relief to over-indebted consumers through the debt review process. The national credit act requires that a creditor perform a full credit assessment before entering into a credit agreement with you, these regulations contain credit assessment criteria that they need to comply with. This is to ensure you have the financial means to pay the proposed credit instalments. However - these regulations are sometimes loosely interpreted by creditors and they put you in a situation where you are over-indebted. Debt review is a solution to this exact situation.
How can the Debt review listing be removed?
There are two ways to get the debt review flag removed from your name:
Settle all of the debt which has been listed under debt counselling. The debt counsellor can then issue a clearance certificate and remove the debt review flag from your name.
A firm can apply through the courts to reject the debt counselling. This means that you will need to prove that you can afford the original contractual instalments prior to the debt review. There are also costs involved and will be discussed with the firm directly.
Advantages of debt review
Debt review is a handy financial tool, while you are under debt review the following benefits are clear:
Instant protection from debt collectors and legal action from your creditors
Creditors are not able to repossess assets as long as you keep paying your debt review instalment
Lower monthly payments
A single affordable monthly payment
Lower interest rates
In some cases, you may be able to settle your debt faster
You will be paying less on debt and therefore have more money available to spend on living expenses and supporting your family
Disadvantages of debt review
While under debt review - the following effects are to your detriment:
You are not able to apply for more debt while under debt review
In some cases, it can take longer to settle your debt
Your credit profile will be marked as under debt review while you are under debt review so that you cannot borrow money during the process
You are bound to your debt review agreement and it can't be cancelled until you complete your entire debt review plan and settle all your debts
You still need to settle the agreed payment per month so that the national distribution agency can pay your creditors.
When is debt review a good idea
Debt review is a good idea for the following individuals:
You still earn an income on a monthly basis
You pay more than R1500 per month towards your debt
You are unable to meet your living expectations due to the impact debt payments are having on your financial situation
You don't have any judgements on your name
You are not blacklisted by any creditor
You want to save on debt payments on a monthly basis
When is debt review not a good idea
Debt review is not perfect for everyone - some individuals that are negatively impacted by applying for debt review are:
If you are blacklisted or there is a pending judgement against your name
You have lost your income and can't afford your debt anymore
You want to settle all your debt with an available lump sum of money
You can afford to make your debt payments monthly
You want to and think you will afford to buy a house or car in the near future
