How to Exit Debt Review in South Africa: A Comprehensive Guide

Debt review is a struc­tured process in South Africa which is aimed at assist­ing those per­sons who are in debt cri­sis. In this light, one method through which this works is giv­ing an over indebt­ed con­sumer a frame­work that is ground­ed on law that enables them some con­trol towards pay­ment col­lec­tion and also puts them out of the clutch­es of harass­ing cred­i­tors. This guide will take you through the process for exit­ing South African debt review, the steps involved in exit debt review, the ben­e­fits, and con­sid­er­a­tions you should be aware of before mak­ing this deci­sion.

Part 1: Under­stand­ing Debt Review and Its Ben­e­fits

Debt review is a legal form acknowl­edged in the legal sys­tem of South Africa due to the NCA or the Nation­al Cred­it Act. It is most­ly to free the con­sumers from the creditor’s hold and pro­vide a real­is­tic method of pay­ing an oblig­a­tion. A con­sumer placed under debt review enjoys legal immu­ni­ty against legal pro­ce­dures by cred­i­tors. Also, cred­it bureaus flag a con­sumer’s name under debt review.

Ben­e­fits of Debt Review 

• Legal Pro­tec­tion: You are pre­served from legal and harass­ing cred­i­tors with repos­ses­sions includ­ed.
• Restruc­tured Pay­ments: under debt review pay­ments are usu­al­ly paid in small­er sums by nego­ti­at­ing an increased inter­est rate being repaid over­time.

• Reha­bil­i­ta­tion of Cred­it: you would stand a chance at reha­bil­i­tat­ing cred­it score on the way after clear­ing the pre­scribed peri­od of debt review.

But there are times when exit debt review could be an option espe­cial­ly when there is improved finan­cial sta­bil­i­ty.

Part 2: How Debt Review Works

Once a con­sumer applies him­self for a reg­is­tered debt coun­selor, the process will start ana­lyz­ing one’s per­son­al finan­cial posi­tion and deter­mine if that one is over-indebt­ed. What the debt coun­selor will do depends upon whether the con­sumer qual­i­fied or not; he will then endeav­or to nego­ti­ate reduced pay­ments for con­sumers with his cred­i­tors, at times includ­ing an appli­ca­tion in court effect­ing and con­firm­ing the debt review process.

• Ini­tial Assess­ment: For a pay­ment to be made the debt coun­selor will eval­u­ate your income, expen­di­ture and debt.
• Debt Restruc­tur­ing: The debt coun­selor goes to the cred­it and per­suades them to accept a far more rea­son­able repay­ment sched­ule.
• Court Appli­ca­tion: In case the debt coun­selor deems it is so, a court appli­ca­tion is done to legal­ly set the process of debt review.

The process of review­ing debts may take a num­ber of years depend­ing on the debt amount and terms of pay­back.

Part 3: Rea­sons You Might Want to Exit Debt Review

There are numer­ous rea­sons why some­one would want to get out of debt review:

• Improved Finan­cial Sit­u­a­tion: When­ev­er a per­son­’s income increas­es or his liv­ing expens­es are decreased, then there is no more neces­si­ty of debt review struc­ture.
• Access to Cred­it: Once a per­son falls under debt review, then it becomes quite tough to access new cred­it. For instance, if a per­son is inter­est­ed in acquir­ing a home loan, car loan, or any oth­er kind of cred­it, then the per­son may be pushed out of debt review.
• Debt Set­tle­ment: If one has paid most of his or her debts or if the per­son has an agree­ment with cred­i­tors, then he or she can opt to get out of debt review ear­ly.
• Life Changes: At times, changes in life, such as divorce or a job, may force one to review his or her finan­cial sta­tus and whether he or she can stick with debt review.

How­ev­er, before an exit debt review there is the long-run impli­ca­tion of debt review.

Part 4: Legal Process to Exit Debt Review

To exit debt review in South Africa, it is with sev­er­al key steps all and is reg­u­lat­ed by the Nation­al Cred­it Act to include request­ing a clear­ance cer­tifi­cate, appli­ca­tion through the court is nec­es­sary, and to cred­it bureaus to update your cred­it sta­tus.

Steps to Exit Debt Review

• Request­ing a Clear­ance Cer­tifi­cate: when you are only with the mort­gage as your source of debt then you will engage the debt coun­sel­lor to arrange for for­mu­la­tion of clear­ance cer­tifi­cate. The cer­tifi­cate will also show that you have gone through the process of debt review and ful­filled your legal require­ment to pay your debts. It is rather indis­pens­able for updat­ing your cred­it pro­file.
• Court Appli­ca­tion for Debt Review With­draw­al: if you desire to apply for debt review before clear­ing all your debts, or to make large pur­chas­es for instance to buy prop­er­ty, you need per­mis­sion from the court to do so. The court con­sid­ers whether you deserve this action giv­en that one can­not be in a worse posi­tion finan­cial­ly after exit­ing debt review and be in a posi­tion of social cred­it.
• Noti­fy­ing Cred­it Bureaus: your debt coun­sel­lor will for­ward a cor­re­spon­dence to the cred­it ref­er­ence agen­cies to remove the “debt review” nota­tion from your cred­it ref­er­ence once you have obtained your clear­ance cer­tifi­cate. This can enhance your cred­it sta­tus a big deal and thus find it easy to apply for loans or cred­it. It rep­re­sents the final­i­ty of your debt review process that has been under­tak­en.

Part 5: The Impact of Exit­ing Debt Review on Your Cred­it Report

The exit debt review can have great effects on your cred­it report in a dif­fer­ent way.

Pos­i­tive Impacts

Once you come out from the debt review sta­tus and set­tle the debts, there would not be any “debt review” sta­tus men­tioned on your cred­it report. This might make new cred­its such as loans or cred­it cards eas­i­er to access. Even if you main­tain a clean finan­cial record after you exit debt review, your cred­it score will start increas­ing grad­u­al­ly.

Neg­a­tive Impacts

You might still impact your cred­it score when leav­ing debt review if you can­not pay off all your debts or if the imple­men­ta­tion is not per­fect. The cred­i­tors will report any missed pay­ments or defaults, which could take some con­sid­er­able time to be removed. You should ensure all your debts have been paid and that you do not again get your­self into debt as you leave debt review.

Part 6: Case Stud­ies of Exit­ing Debt Review 

Case Study 1: Mark’s Suc­cess­ful Exit

Mark was under debt review for 4 years. He had con­stant income growth that, in turn, improved his posi­tion. His most of unse­cured debts have been set­tled. He is also in arrears on the mort­gage. His debt coun­sel­lor issued a clear­ance cer­tifi­cate, from which he has been able to exit debt review suc­cess­ful­ly. With­in a short while after Mark receives the clear­ance, his cred­it report was updat­ed; he was, there­fore, suc­cess­ful in apply­ing for a home loan.

Case Study 2: Sarah’s Chal­lenges Post-Exit

Sarah had left debt review ear­ly because she paid most of the unse­cured debts but still had some small amounts. She could not, how­ev­er get fresh cred­it because there were pend­ing debts in the cred­it report. She had even left the process but her cred­it score was low since it is not ful­ly paid. She is there­fore advised to take some oth­er steps on how to rec­ti­fy her pro­file in the near future.

Part 7: Man­ag­ing Your Finances After Exit­ing Debt Review

After com­ing out of debt review, it is nec­es­sary to take proac­tive mea­sures to cor­rect­ly man­age finances. The fol­low­ing best prac­tices will see to it that you are not revert­ing to debt again:

• Cre­ate a Bud­get: Pre­pare a month­ly bud­get that will ana­lyze income and expens­es. Stick to the bud­get so that you do not have too much debt.
• Build an Emer­gency Fund: Prepa­ra­tion will save you from crip­pling expens­es that can ruin your finan­cial sta­bil­i­ty. Save at least 3–6 months’ worth of liv­ing expens­es.
• Mon­i­tor Your Cred­it: Though there may be inac­cu­ra­cies and prob­lems in your cred­it report, being watch­ful will ensure no dis­crep­an­cy occurs. Ser­vices like Tran­sUnion or Exper­ian will help you mon­i­tor the cred­it score.
• Avoid New Debt: Be cau­tious of new debt, espe­cial­ly cred­it card debt. Apply for cred­it only when nec­es­sary, and ensure you are capa­ble of pay­ing the need­ed amounts.
• Work with Finan­cial Advi­sors: You can use finan­cial advi­sors when nec­es­sary for long-term plans like retire­ment sav­ings, invest­ment, and tax plan­ning.

Con­clu­sion

It is a great achieve­ment in your finan­cial life when you are able to come out of debt review, but do it wise­ly. Once you are in a bet­ter finan­cial stand­ing per­son­al­ly, or you need to acquire cred­it, you will most like­ly want to be out of debt review for­ev­er. Legal effects and man­ag­ing your cred­it when exit debt review mark steps toward the long-term and the ulti­mate state of finan­cial recov­ery. Ready to take con­trol of your finan­cial future? Dis­cov­er more expert tips on man­ag­ing debt and achiev­ing finan­cial free­dom by explor­ing our lat­est arti­cles on finan­cial plan­ning and smart mon­ey man­age­ment!