What Is Debt Review, and How Does It Work in South Africa?

Who qualifies for debt review?

You qualify if you are over-indebted: section 79 of the National Credit Act defines that as being unable to pay all your credit obligations on time from your income after reasonable living expenses. A debt counsellor works this out from your payslips, bank statements and a list of your debts.

• You regularly pay one account by missing another, or borrow to cover existing instalments.
• Your credit accounts are in arrears and creditors or collectors are contacting you.
• You have a regular income. Debt review restructures payments; it cannot help if there is nothing to restructure them from.
• An account where the credit provider has already started legal action generally cannot be added to a new debt review.

How the debt review process works, step by step

1. 1Assessment. You give an NCR-registered debt counsellor your income, expenses and debts.
2. 2Application (Form 16). You sign the application for debt review.
3. 3Notification (Form 17.1). Within 5 business days the counsellor tells every credit provider and the credit bureaus that you have applied. From here the bureaus show you as under debt review.
4. 4Certificates of balance. Your credit providers send the counsellor your account balances and terms.
5. 5Outcome (Form 17.2). Within 30 business days the counsellor confirms whether you are over-indebted.
6. 6Proposal. The counsellor proposes reduced instalments and longer terms to your credit providers.
7. 7Court order. The restructuring is made an order of the magistrate's court (or the National Consumer Tribunal) under section 87, so it binds your creditors.
8. 8One monthly payment. You pay a single amount to a payment distribution agent (PDA), which pays each creditor.

What does debt review do to your credit record?

From the day the Form 17.1 notification goes out, the credit bureaus list you as under debt review. Lenders see that flag, so you cannot take on new credit until you exit. South Africa has no single "blacklist"; the flag is a status on your bureau records, not a ban for life.

When you exit through a clearance certificate or a court order, the bureaus must remove the debt review flag. Your payment history on the accounts remains, which is why paying the plan on time matters for rebuilding your score. See how to rebuild your credit score after debt review.

What debt review protects you from

While your debt review is running and you keep to the payments, the credit providers whose accounts are included cannot take legal action to enforce those agreements. That is what protects a car or home that is in the plan from repossession. Miss payments, and a credit provider can ask to end the protection on its account and enforce it.

How long does debt review last?

Most debt review plans run for about 3 to 5 years, depending on how much you owe and how far the instalments were reduced. It lasts until your short-term debts in the plan are paid, unless you exit earlier through a court order. A home loan can keep running after that if it is up to date.

How do you get out of debt review?

There are only two legal ways to end debt review once it has gone to court:

• Clearance certificate (Form 19). When you have paid all the short-term debts in your plan, your debt counsellor must issue a clearance certificate under section 71, and the flag is removed. See the clearance certificate explained.
• Court order. If you still owe money but are no longer over-indebted, a court can end your debt review. Courts can also set aside a debt review that should never have been granted.

Anyone offering to remove the flag "overnight", for a fee and without one of these two documents, is not acting within the law. Read how to remove debt review or check whether you qualify.

Debt review vs debt counselling vs debt consolidation

Debt review and debt counselling describe the same process from two sides. For the full comparison see debt counselling in South Africa.