Debt counseling is an option offered through the National Credit Act 2007. This act allows an indebted consumer to reconstruct his monthly debt payments to creditors when he is constantly struggling to meet the payments monthly. Under the debt counseling option, an indebted consumer is under a debt counselor who guides him through the process, receives his single monthly payments for distribution to creditors and makes sure that he is debt free after the prescribed period. Debt counseling is basically new in South Africa thus there are some apprehensive consumers. Check out the most frequently asked questions on debt counseling so you will be convinced that this is the right option for you to be debt free.
- Will my creditors stop calling me when I am under debt counseling?
Once you’re creditors have received the 17.1 Notice, (states that you have applied for debt counseling) your creditors will stop calling you. There will be instances that not all of the creditor’s staff knows that you have applied for debt counseling, thus, they may still call you. When you receive such a call, simply inform them of the 17.1 Notice sent to them on your behalf (you will also have copies of the 17.1 Notice) and they will stop calling you.
- How do I go about paying creditors?
Once you are done with the debt counseling process and ready to start making payments, you will only make one monthly single payment to the Payment Distribution Agency. You will henceforth, not be making any direct payments to your creditors. A listing of all your creditors as well as the amount that has to be paid to each of them should be sent to the PDA. It is the PDA’s responsibility to forward your payments to your creditors. Should you decide to make an additional payment , you also have to pay to the PDA.
- How much is my monthly payment?
The amount stipulated in your application for after deducting your basic cost of living expenses.
- I have already received Summons; can I still be under Debt Counseling?
When you have already received summons, debt counseling can no longer stop your creditor’s repossession action. What you can do is discuss with your creditor repayment and ask them to stop the repossession process. If you are successful with a new payment plan you can turn over this creditor to debt counseling and your debt counselor will continue the process for you.
- Will debt counseling affect my credit score?
The moment you apply for Debt Counseling, the National Creditor Regulator will be informed and will in turn advise the credit bureaus. Any form of credit that you will apply for will be disapproved while you are under Debt Counseling because it will appear in the system that you are going through the process. Although, when you are done with debt counseling and all your debt balances have been paid, your credit file will be untarnished.
- Will debt counseling influence my future credit applications?
As soon as you are done with Debt Counseling, which means you have settled all your outstanding debts, you will be issued a form17.4 and your name will be taken out of debtcounseling within 10 working days. The credit bureaus will also get rid of the debt counseling annotation from their systems. In which case, it is now the creditor’s decision if they will approve your new credit application. Actually ,this should not be a problem because you now have a clean credit record, but this is beyond the control of the debt counselor.