The National Credit Regulator (NCR) works to help consumers understand the various aspects of credit agreements, debt review, and the rights and responsibilities of consumers.
Despite the available information, Cape Debt Clinic receives regular calls from consumers who say that debt review was not working for them, and that they stopped paying. Now they want to get out of debt review.
When you are under debt review, it is easy to forget what it was like before debt review, when you were being harassed around the clock by phone calls from creditors After a while of being left alone by creditors, if debt review payments are stopped, those dreaded phone calls start again. Only this time, you no longer have the support of a debt counsellor.
What happens if I stop my debt review payments early? Why can the debt counsellor no longer help me?
If you stop payments, the creditors will terminate and hand over to a legal company to issue a Section 129 notice. As such, the debt counsellor may no longer facilitate negotiations. Cape Debt Clinic has a few clients who have re-entered debt review after a lapse in payment. It is a challenge to negotiate on interest rates. If it is already handed over, we find it difficult to trace who is actually managing the account. In all cases, legal handover means more costs, so the balance will be increased due to telephone calls, letters, emails and administrative costs. Files at attorneys are seldom – if ever – handed back to creditors. Debt counsellors are reluctant to take over clients from other debt counsellors because of these complications.
Once you have entered into debt review and decide to stop paying, you are defaulting on a legally binding contract.
The National Credit Act is very clear: Debt must be fully settled in accordance with the original credit agreement, as it is a legally binding contract. If you are over-indebted and can’t afford to repay your debt, repayment arrangements are made by a debt counsellor and this is legally binding. An application for debt review is your last-chance lifeline to become debt free.A debt counsellor is able to assist as long as you are paying in accordance with the restructured debt review.
But debt review can leave you floundering. It might feel like the financial strain from debt review is preventing you from moving forward.
So what is the solution to the financial strains of debt review?
The only solution is repayment of the debt.Once settled, you should obtain all paid up letters, then submit the papers to your Debt Counsellor for the Clearance Certificate to be issued.
It is far easier to stick to the National Credit Act guidelines and remain within the protection of your debt counsellor.Your debt counsellor can help you with the stressful aspects of debt review, as long as you continue to pay your debt review instalments.
The choice to default on debt review leaves you are at the mercy of creditors and their collections agents.
So what can I do if I have prematurely stopped my debt review payments?
The only thing to be done is for the debt to be paid. Because so few debt counsellors are willing to work with a consumer who has defaulted on debt review, you will most likely have to settle your debt on your own – without the support of a debt counsellor.
If you are fortunate enough to find a debt counsellor willing to take your case, you may re-enter the negotiation process. Re-entry into negotiation is subject to the creditors accepting the reinstatement motivation. Debt counsellors find these applications fraught with complications – (read here).
Essentially, you are under debt review from the moment Form 16 is signed until the debt counsellor issues your clearance. So, pay your debt in accordance with the court order, get all your paid up letters and keep in close contact with your debt counsellor at all times.
Stay Informed: Download the NCR Consumer Information Booklet