When Consumers are struggling to pay off their debt, they can apply to a Debt Counsellor for help. The Debt Counsellor will perform what is called a “Debt Review”. Once the Debt Counsellor knows how much a Consumer needs to spend (and save) each month, then they will know how much the Consumer has available to repay the debt. Normally a person will go into a Debt Counsellor’s Office to meet and di
scuss their debt, but in some cases a Consumer will deal with a Debt Counsellor over the phone or internet. The Debt Review is the process where the Debt Counsellor (DC) contacts the Consumers’ various Creditors and get information on exactly how much they owe each month as well as overall. The Debt Counselor and Consumer will also consider how much is spend on monthly household expenses. This would include everything from food and telephone calls to insurance and medical bills. Most Consumers find it hard to create a realistic budget. Once the DC knows how much a Consumer needs to spend (and save) each month, they will calculate how much the Consumer has available to repay their debt. Once the DC has all the information from Consumers and Creditors, they will be able to figure out if the person is “over indebted”. This means that currently the Consumer cannot afford to cover their necessary monthly running costs, we well we repay the full amounts that their Creditors are asking for each month. If so, then the Consumer can get help through debt restructuring as set out in the National Credit Act. The DC then uses the specialised computer software to figure out the best way for the Consumer to repay their debt. The DC will be fair to all the Creditors to ensure they get their money back in as short a time period as possible. DEBT RESTRUCTURING
The DC talks to, and negotiates with the Credit Providers to adjust the current monthly repayments. The DC also negotiates to lower or even totally remove all interest charges. This means that the Consumer actually saves money over time. They may have to repay over a longer period, and pay some fees for the process, but can end up saving a lot of money throughout the process. After receiving the Creditors’ replies to the proposed plan, the DC makes a formal proposal to the Magistrates Court to reconstruct the Consumers debt. While many Creditors normally like to recover funds over 24 months or less, the proposal will normally be over a longer time period with smaller monthly repayment amounts to each Creditor. The Magistrate has the power to make the proposal into an Order of the Court. This legal document protects Consumers and assets. The Debt Counsellor submits the Court Order to the Credit Providers, and guides the Consumer through the process of making payments by utilising one of the National Credit Regular (NCR) registered Payment Distribution Agencies (PDA’s). The Consumer makes a single payment to the PDA, who in turn distributes the amounts as agreed, to the various Credit Providers each month. The Consumer now knows how much they have to spend on household expenses, as well as how their one affordable repayment amount to the PDA will be. They will also know how long they will have to pay until they are DEBT FREE.
