Many of you are asking how to get out of debt review, and we understand why. While you are under debt review, you cannot obtain more credit until your clearance is issued. This, combined with your monthly installments, will limit your spending; making it seem difficult to get by – especially at the beginning. You want to get out of debt review as fast as possible because adjusting to the limitations imposed on you by debt review can be awfully hard. When you have become accustomed to obtaining credit for the things you need and want, or are used to having some extra spending money each month, it is a large adjustment having to stick to a monthly budget for essentials. You may be feeling like you are forced to put your plans on hold, because your money is just not stretching the distance.
Can and should you get out of debt review?
Let’s look at your options. Something you may not be thinking about right now is the benefits of debt review over other debt relief options. Debt review offers you more long-term security than any other debt relief option available.
You may consider taking out another loan to pay your current debt, but this will not solve your problem in the long term. Under debt review, you are not able to obtain more credit. But even if you were able to obtain another loan, you would still be stuck with the repayment of that loan in the end. And because the repayment of that loan would proceed outside of debt review, you would not benefit from reduced monthly installments: You would have to pay back the full expected amount, with interest, without extended terms. This way, your cycle of over-indebtedness simply does not end but gets worse and worse over time.
Surrender of Assets. This will cause you to lose the assets you have: your car and even your home. Losing the assets you’ve worked so hard for is a massive setback – you will have to work twice as hard to get back to where you were before. The proceeds of the eventual sale of your assets will be deducted from your overall debt, but you will still have to pay the shortfall. This setback can be avoided if you persevere with debt review.
Sequestration. This process is expensive. You must appoint an Attorney to represent you at the High Court, with fees upwards from R 15 000. All your assets will be claimed and paid over to creditors. This means you will also lose your home, your car, and any other assets you may have. For every Rand you owe your creditors, you will pay approximately 20 cents back. After five years, you may exit Sequestration after approaching the High Court with the consent of all your creditors. The Court will decide if you are rehabilitated or not.
There is a bright side to debt review
Unlike sequestration or surrender of assets, debt review helps you keep your assets.
Under debt review, you get to keep your home and your car. You have the benefit of reduced, affordable monthly payments and legal protection. The legal protection you get under debt review prevents your creditors from harassing you because they are legally obligated to accept the payments arranged by your debt counsellor. Under debt review, you can increase your monthly payments when your finances improve. Increasing your monthly payments means that you can get out of debt review as soon as possible.
When you have received your final paid-up letter from your creditors under debt review, your credit record will be cleared and you will receive a clearance certificate.
Debt review may not last longer than 5 years: that is the absolute maximum amount of time debt review can take. But there is no reason why it can’t be shorter if you increase your payments. If you do increase your monthly payments, remember that you should always do it in a way that is affordable to you: for example, you can increase your monthly payments after a salary increase or performance bonus. You may even discover that you can sacrifice some non-essentials for a while – for example, getting your nails done or buying a new seasonal wardrobe – and rather put that money towards you debt review payment. Never dip into your essential budget to increase your debt review payments, and never try to obtain a loan to increase your installments – this will hurt your long-term goals. Because debt review prevents your from obtaining more credit until you are cleared, any loan obtained under debt review will be illegal. However, increasing your monthly payments safely as suggested, will shorten your debt review term.
Worst case scenario: Debt Review for the full 5 years
Even if you are unable to increase your payments and must remain under debt review for the full 5 years, you are still getting the benefit of a clean slate when you do finish. Your name will be cleared, you will have learned some powerful new financial habits, and you will be able to obtain credit again if you choose to do so. You will still have your car, home, and other assets, and once the debt review is done, you know that it is finished – no nasty surprises, no loan repayments, nothing.
Making sure you can handle debt review
A registered debt counsellor will work with you to make sure that you are able to afford your monthly debt review installments. Before you get started, your debt counsellor should do an affordability assessment with you. This will prevent your debt review payments from putting you in an impossible position. Even if it feels uncomfortable, you can rest assured knowing that you can, in fact, afford this. Your debt counselor will negotiate with your creditors, banks and other relevant parties on your behalf. You will stop receiving collections calls – and you will also have peace of mind knowing that you are not making more debt and won’t be losing your home or car.
When you start speaking to a debt counsellor, make sure that you ask as many questions as you need to understand the process. Insist on an affordability assessment and ask for your debt counsellor’s credentials. A good debt counsellor will always be available to you during the process and communication between you should be open.
The answer to getting out of debt review
With everything said, the only way to get out of debt review is to get through debt review. With debt review, things may not seem better immediately but with dedication, you will have a clean slate, clear name, and your assets intact in the long term.