Breaking the cycle of debt: A step-by-step guide to debt counselling for South Africans

Debt review is a legal process that is designed to help individuals in South Africa who are struggling with debt.

It’s a structured process where a debt counsellor works with you to assess your financial situation, identify your debts, and develop a feasible repayment plan that suits your financial situation.

What happens when you go under debt review?

During debt review, your debt counsellor speaks with your creditors on your behalf to reduce your debt repayments and interest rates and protect you from legal action by your creditors.

The goal of debt review is to help you regain control of your finances, manage your debts, and ultimately become debt-free. It’s a legal process that is governed by the National Credit Act (NCA), which was implemented in 2007 to protect consumers from abusive lending practices.

If you want to know more about the basic of debt consolidation and how it works, we’ve written on the topic extensively. In this blog post, however, we want to break down each and every step in the debt review process so that you know exactly what to expect.

The debt review process in a nutshell

Contact a registered debt counsellor and request a debt review.
The debt counsellor will conduct a financial assessment to determine your income, expenses, and outstanding debts.
If you qualify for debt review, the debt counsellor will notify all your creditors and the credit bureaus that you are under debt review.
The debt counsellor will develop a debt repayment plan that is affordable and sustainable for you, while also being fair to your creditors.
The counsellor negotiates with your creditors to reduce your debt repayments, interest rates, and fees.
You'll make one monthly payment to the debt counsellor, who will distribute the funds to your creditors according to the repayment plan.
The debt counsellor will provide ongoing support and advice to help you stay on track with your debt repayment plan.
Once you've paid you debt in full, the debt counsellor will issue a clearance certificate to confirm that you have successfully completed the debt review process.

Now, let’s take a closer look at each of the steps in the debt review process.

Step 1: Initial consultation with a debt counsellor

The first step in the debt review process is to contact a registered debt counsellor and request a consultation. Our site contains a near-comprehensive collection of South Africa’s small, medium, and large debt review companies so you can pick one that suits you.

Need help picking a debt review agency? Check out our guide to finding the right debt review agency for you.

During this initial consultation, the debt counsellor will explain the debt review process and assess your financial situation to determine if you qualify for debt review. The debt counsellor will also explain the costs involved in the debt review process and answer any questions you may have.

Step 2: Debt review and financial assessment

If you qualify for debt review, the debt counsellor will conduct a financial assessment to determine your income, expenses, and outstanding debts.

The debt counsellor will request your credit report from the credit bureaus and assess your debts to determine which debts are eligible for debt review. The debt counsellor will also assess your income and expenses to determine your disposable income and what you can afford to pay towards your debts.

Step 3: Development of a debt repayment plan

Based on the financial assessment, the debt counsellor will develop a debt repayment plan that is affordable and sustainable for you.

The debt repayment plan will prioritize your debts, with secured debts such as a mortgage or car loan taking precedence over unsecured debts such as credit card debt. The debt counsellor will also calculate a reduced repayment amount for each debt, which is based on your disposable income.

Step 4: Negotiation with creditors

The debt counsellor negotiates with your creditors on your behalf to reduce your debt repayments, interest rates, and fees.

The debt counsellor will present the debt repayment plan to your creditors, who will have the opportunity to accept or reject the proposal. In most cases, creditors are willing to accept the proposal as it shows that you are making a concerted effort to repay your debts.

Step 5: Implementation of the debt repayment plan

Once the debt repayment plan has been agreed upon by all parties, you will make one monthly payment to the debt counsellor, who will distribute the funds to your creditors according to the repayment plan.

This ensures that your debts are being paid in a structured and timely manner.

Step 6: Conclusion of the debt counselling process

Once you’ve paid your debts in full, the debt counsellor will issue a clearance certificate to confirm that you have successfully completed the debt review process.

This certificate will be sent to all the credit bureaus and your creditors, which will remove any negative information from your credit report.

Key takeaways on debt review:

Debt counselling is a legal process in South Africa that is designed to help individuals who are struggling with debt.
The debt review process involves an initial consultation with a debt counsellor, a financial assessment, development of a debt repayment plan, negotiation with creditors, implementation of the plan, and conclusion of the process.
Debt review can help you regain control of your finances, manage your debts, and ultimately become debt-free.
Debt counsellors can provide ongoing support and advice to help you stay on track with your debt repayment plan.
Once you’ve successfully completed the debt review process, you’ll receive a clearance certificate that confirms that you have repaid debts and can move forward with a clean slate.
If you’re struggling with debt, it is important to seek help as soon as possible to avoid legal action by your creditors and long-term damage to your credit score.