Saved by debt review

2013-10-06 14:00

When his debt began to spin out of control, Joseph Masemola applied for debt review via a debt counsellor in 2010. Since then, he has managed to settle and clear all his debt, with the exception of a Nedbank personal loan and home loan. The personal loan will be settled and cleared by the end of next month, leaving Masemola with just his home loan. He wrote to City Press to find out if he could exit the debt-review process and pay his home loan instalments directly to Nedbank and not via a debt counsellor. Neesa Moodley-Isaacs reports

Rescission of debt review

Masemola was advised by his bank to apply, via his lawyer, for a rescission of debt review court order and to apply for his free credit reports, as per the National Credit Act.

“On obtaining my credit report from three different credit bureaus – TransUnion, Compuscan and Experian – I was pleased to see that the debt-review process has protected me from being blacklisted and that there are no judgments against me,” says Masemola.

His debt counsellor has informed him that once the rescission of his debt order rearrangement order is passed, it could take less than a month to remove him from the debt-review process.

Anton Thomas, head of debt counselling operations at Nedbank, says the bank’s home loans division was able to offer Masemola restructured repayment options to choose from, subject to an affordability assessment when he gets out of debt review.

This is subject to the court order for debt review being rescinded.

The bank also confirmed that no legal action will be instituted against Masemola, provided he enters into a restructured agreement and honours the new repayment agreement entered into with the bank.

Solutions for overindebted homeowners

‘For most people, their home is their biggest investment, so banks have come up with a range of options for homeowners to consider, if and when in financial difficulty, regarding their home loan repayments,” Thomas says.

In the past, if you were not able to repay your home loan due to financial difficulty, one of the few solutions available was to simply “give the house back” to the bank that financed it. This process, known as foreclosure or repossession, usually results in an unfortunate financial loss – both for the homeowner and the bank.

If the bank repossesses your home, you invariably end up with a bad credit record. To help affected clients, Nedbank has come up with a payment-solutions website that provides homeowners with options outlining various scenarios regarding any impact, benefits or limitations that you need to consider when you’ve fallen into arrears on your home loan.

Thomas explains that since 2009, Nedbank has restructured more than 16?000 home loans, while the Nedbank Assisted Sales programme has helped a further 4?000 clients avoid foreclosure on their homes.

The other big banks – Absa, First National Bank and Standard Bank – have similar programmes in place.


»?You borrow money to pay other debts

»?You use your credit card and/or overdraft to buy food and other necessities

»?You skip payments on some accounts in order to pay other accounts

»?You receive letters of demand from lawyers and credit providers

»?You have judgments against you


You are considered to be overindebted if your expenses or your debt repayments exceed your income. If this is the case, you are eligible to apply for debt review under the National Credit Act.

Once you apply for debt review, you will not be able to access any further credit until you have exited the debt-review process.

You will need to apply to a registered debt counsellor for debt review. The counsellor will then draw up an affordable budget for you and call your credit providers to negotiate a restructured repayment plan.

Once the repayment plan is in place, you make one monthly debt repayment to a payment-distribution agency, which then makes the required payments to your different credit providers.

Once you have repaid all your debt, your debt counsellor has to issue you with a debt-clearance certificate.

Ian Wason, chief executive of DebtBusters, says that often, by the time clients apply for debt review or debt counselling, they are spending 78% of their net monthly income on their debt repayments when they need approximately 70% of their net income for their living expenses.

“After we have assessed their finances, drawn up a budget and a new repayment plan, we are able to reduce their debt repayments to an average of 30%,” says Wason.


If a bank chooses to follow a legal route because you have defaulted on your home loan, the process is as follows:

»?The bank will call you telephonically, or see you in person where possible, and will also send you a written notice that payment is required. Under the National Credit Act, a credit provider must send you a section 129 notice to inform you that you are in default before it can proceed with legal action against you.

The section 129 notice must also inform you of your right to refer the credit agreement to a debt counsellor, an alternate dispute resolution agent, the Credit Ombud or a consumer court in an attempt to resolve any dispute or agree to a plan to settle your debt.

»?You will be issued with a letter of demand.

»?The bank will issue you with a court summons. Default judgment is taken, after which the matter is pursued by the sheriff of the designated court.

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