A desperate Fin24 reader who can't afford to pay his debt looks to an expert for guidance on the options available and what it means.
I have two loans to pay off. I can't afford to pay them. What would you suggest: do I go for administration, review or consolidation? What are these things, anyway?
I urgently need help as I'm drowning in debt.
Renee Marais, registered and independent debt counsellor with the NCR, responds:
When a consumer finds themselves in a situation where repayment of debt becomes problematic, please look at the following options.
1. Make arrangements with the credit providers affected in perhaps restructuring the credit agreement to reduce the instalment and extend the term under the contract.
2. Perhaps have another look at your budget to see if there is a way to reduce your monthly expenditure.
- This is for debt below a threshold of R80 000, but is a process that is facilitated by an administrator and impairs a consumer's commercial capabilities.
- In this case, the consumer's legal standing is impaired, but it is a matter that falls within the Magistrate Court's jurisdiction.
- This is also a process to be conducted by a lawyer.
- In this case the payments are made to the administrator who then pays the debt.
- There are fees involved.
- The process must be explained to you at the first point of contact.
- This is another option, but in this the court also appoints a curator and the consumer's commercial capabilities are also impaired.
- These are High Court cases and will have an impact on your legal standing, and as such, a rehabilitation certificate is required to exit after the prescribed time.
- This process is done by a lawyer.
- The payments are made to the appointed curator who pays the credit providers.
- The fees are also part of the process and should be explained to you at the first point of contact.
5. Debt review
- This does not impair a consumer's commercial capabilities, and consumers in this instance remain fully in charge of all decision-making and payment of debt.
- A debt counsellor may not be paid directly by the consumer for distribution of payments to credit providers.
- The National Credit Act provides for two ways to pay credit providers: one is for a consumer to make payments directly as per the arrangement confirmed by the court for restructuring of existing debt, and the other is to use a PDA (Payment Distribution Agent).
- A consumer is not obliged to make use of a PDA and cannot be forced to do so.
A consumer can only exit debt review in the following manner:
i. Before the 17.2 notice (which informs all parties of the debt review process) is issued, the consumer can inform the debt counsellor that he or she does not want to proceed. There is a charge of R650 cancellation and admin fee payable. The cancellation must be done within 20 days of the date of the form 16 (application form) being signed.
ii. If the debt counsellor issues the form 17.2 there are only two ways to exit:
1. If you paid up all the debt and obtain a clearance certificate;
2. If you prove to the court that you do not need debt review and your debt is 100% up to date with the original credit agreements the court may find that you are not over-indebted and reject the debt review application.
iii. If you do have debt review order you can only exit if one of the following happens:
1. You pay up all the debt per the order in full, can prove it to the debt counsellor (same goes for prescribed debt) you can obtain a clearance certificate.
2. If there is a material defect to the debt review order from the Magistrate Court the order can be taken on review in the High Court but this is a legal matter and can only be done by a lawyer.
3. If there is a material defect to the debt review order from the National Consumer Tribunal you can either appeal to a full bench of the NCT or take the NCT order on review in the High Court. This is again a legal matter and can only be done by a lawyer.
Debt review is not a one size fits all solution and is a process that should be addressed by a duly registered debt counsellor (DC).
- The opinion is as a debt counsellor in the industry since July 2010 and not to be construed as legal advice. You can access more information on debt review on the NCR website www.ncr.org.za or contact a lawyer for legal advice.
- Renée Marais, Independent Debt Counsellor, NCRDC1780 Pretoria
Questions may be edited for brevity and clarity.
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