Being over-indebted is not a good place to be. Symptoms of over-indebtedness include feelings of helplessness, high blood pressure, stress-related illness and worse still, the realization that there seems to be no way out.
But there is a way out.
Opting to go under debt review will bring that help that you so desperately need. This is your first good reason to talk to your debt counselor.
So, what does Debt review do?
It restructures your existing debt into one affordable amount, similar to a consolidation loan, where one payment is made per month.
The difference is that you are not able to obtain further credit. Rather, you work with what you have in your pocket each month.
Your debt counselor will perform certain duties in terms of the National Credit Act, the first of which is to sit with you and determine a reasonable living expenses budget with the balance of your income allocated to settling debt.
What should be in your budget?
Right now, you may have trouble putting food on the table, let alone sufficient money to get to work or school. The budget allows you to lift your head above that drowning feeling and provide for your family again.
The debt review practitioner will negotiate with your creditors on your behalf, and based on your affordability will establish a repayment arrangement with each one, with the end result, debt is fully settled and paid up letter is issued by creditor.
So, the question arises – how long will it take?
The duration of debt review largely depends on you. At the beginning all seems bleak, and although the guidelines say that the duration may not exceed 5 years (60 months), your finances may improve sometime in the future, you may increase your payment. Discuss with your debt counselor, no two clients are the same.
How does debt review affect my credit worthiness and credit score?
In most instances prior to debt review, short payments and defaulting payments resulted in a low credit score so credit worthiness is already impaired. For the full duration of debt review, an indicator will appear on your credit report. This remains in place until Clearance is issued.
A Clearance Certificate is the last duty of the debt counsellor. They obtain your paid up letters as the debt is paid off and once all received a withdrawal notice is sent to creditors as well as the Clearance Certificate issued to Credit Bureaus. The NCR is also updated that you have been successfully rehabilitated from over-indebtedness.
You may then re-enter the credit market, should you wish to do so.