Debt Review: Is it Right for You? Part 4

We realize that not all experiences with debt review are positive. In this article, we will discuss how important it is to choose a reputable, respected debt counselor.

We are sharing the story of Tracy*, who fell victim to debt counselors who did not do their jobs with care. Tracy suffered because careless debt counselors did not explain the debt review process to her. They did not assess her properly at the beginning, and they did not handle negotiations with creditors, the debt review registration and the procurement of the court order as they should have.

Choosing a reputable debt counsellor is key to overcoming your debt and completing debt review successfully.

Tracy is a mother of three. She is 38 years old and divorced. After her divorce, Tracy found herself in dire straits – both emotionally and financially. Her sisters moved in with her to help pay the bills so that she could keep her house. Tracy was nevertheless still overwhelmed by expenses. As a manager in a large financial firm, she carefully researched her options and took professional advice before making the decision to go under debt review.

Too good to be true

The first debt counsellor Tracy saw did not ask a lot of questions, and only reassured her that the process would be simple. Payments started to be subtracted from her new savings account every month. Tracy was so relieved to be in debt review – on the road to debt rehabilitation, as she believed – that she did not ask too many questions either.  She had been through enough trauma with her divorce and wanted things to go as smoothly as possible without having to question it every step of the way.

Then, within a year, she was transferred to a new debt counsellor, whom she had never met. Her payments proceeded as normal, and the process continued without interruption. Tracy did not suspect any reason to question the process.

After four years, Tracy eventually found out about Cape Debt Clinic and sought help from us. She had been under debt review for 5 years, yet she had made almost no progress towards paying off her debt. She had done little more than keep up with her payment of interest. Her credit providers were no longer being co-operative, and Tracy was feeling stressed and desperate. How could she not be closer to her goal of being debt-free after all this time?

What had gone wrong with Tracy’s debt review?

Cape Debt Clinic did a comprehensive review and assessment when Tracy came to us. This is something that should have been done by her previous debt counselors in the first place, before starting the debt review process. However, we found out that her previous debt counselors did nothing more than extend the terms of her credit agreements. There was no investigation, no negotiation on reducing interest rates, and no real affordability assessment. At that rate, Tracy’s debt review would have continued for 20 years! At this point, her credit providers were no longer co-operative about negotiating a reasonable arrangement.

Given Tracy’s level of over-indebtedness and the assets she owned, she may have been debt free and eligible for rehabilitation sooner if she had chosen sequestration instead. However, she chose to keep her home, which she would have lost had she chosen sequestration. Unfortunately, the lack of care and competence of her previous debt counselors caused unnecessary obstacles in the way of Tracy completing debt review in a timely manner.

“I didn’t understand the whole process. I was not prepared for when things went awry. I surrendered control and put too much faith in a debt counsellor I had never met, to do it all for me. The most traumatic time of all, worse even than the divorce itself, was when ABSA threatened to repossess my car. Three times! I couldn’t get hold of my debt counsellor, there was no response to my calls or emails. Absa said they had no record of me being under debt review. I had to do all the negotiations myself and I felt so bullied, I just didn’t know where to turn!”

¬ Tracy

Recovering from the blow

Until Tracy came to Cape Debt Clinic, she was unaware of what had been going on. She now makes a point of keeping in touch with Karin, her debt counselor here at Cape Debt Clinic. She asks Karin to explain the process to her so that she is sure that she always knows what is happening behind the scenes.

“I expected the legal process to be quick, but the first attorney withdrew, and I had to pay legal fees twice. I had been paying debt review installments for 2 years before I first got my court order. Then I had another problem because Standard bank didn’t cancel my overdraft when I first went under debt review, so the account continued to accrue charges, even though I couldn’t use it. Even though I have repeatedly provided them with proof of the cancellation, they had not reversed the charges and the balance on that account is now higher than when I first started debt review!”

¬ Tracy

So far debt review has been a rocky road for Tracy. Lifestyle changes alone will not get her debt free by the age of 45. We must overcome creditor resistance to stimulate renewed negotiations.

“In hindsight, even with all the problems I have experienced, debt review was the right solution for me. It is the only way I have been able to hang onto my house. I am just relieved to finally be in safe hands, with a debt counsellor who keeps me involved every step of the way. For once, I feel like I know what is happening and I have more control over my personal finances. If I had to advise anyone else in a similar situation I would say, go for it – just make sure you find the right debt counselor. After all, it is YOUR money!”

¬ Tracy

Are you stuck in a negative debt review cycle like Tracy was?

Make sure, sooner rather than later, that your debt counsellor has truly done their job. Make sure you ask for your debt counsellor’s credentials.

The point of debt counselling is that the debt counselor will facilitate the legal process of debt review to protect you. They should do an initial assessment, establish affordability, negotiate with creditors on your behalf and make sure that the court order is obtained that registers you as being under debt review. A reputable debt counselor will make sure that the National Credit Bureau has a debt review indicator on your profile, and that all your creditors are informed and compliant under the new terms.

It is the job of the debt counselor to speak for you during the debt review process so that you do not have to. The debt counselor should always keep you informed and give you an honest breakdown of the realities and possible pitfalls of the process right from the start.

*To protect her privacy, we have changed her name.