What Is Debt Counselling?

Debt counselling, also known as Debt Review, is a legal process brought about by the implementation of the National Credit Act (NCA) in South Africa. This process involves a Debt Counsellor, who is registered with the National Credit Regulator, assessing a consumer’s financial situation to determine if they are over-indebted. Being over-indebted means that the consumer is unable to meet all their debt obligations due to insufficient income.

How Does Debt Counselling Work?

The debt counselling process begins when a consumer approaches a registered Debt Counsellor. The counsellor will conduct a thorough review of the consumer’s income, monthly expenses, and debt commitments. If the assessment concludes that the consumer is over-indebted, the Debt Counsellor will declare the consumer as such and develop a tailored repayment plan. This plan is designed based on the consumer’s affordability, ensuring that they can make reasonable monthly payments towards their debts while still covering their essential living expenses.

Objectives of Debt Counselling

The primary objective of debt counselling is to help the consumer repay their debts in the quickest period possible without compromising their ability to afford necessary monthly living expenses. The Debt Counsellor negotiates with creditors to accept the proposed repayment plan, which may involve extending the repayment period, reducing interest rates, or both. This restructuring makes the debt more manageable for the consumer.

Debt counselling provides legal protection to the consumer, preventing creditors from taking legal action against them while under review. It also aims to ensure the sustainability of the consumer’s financial health, allowing them to repay what they can afford and gradually move towards financial stability. This process not only offers immediate relief but also sets up the consumer for long-term financial success by managing their debt responsibly and effectively.