Debt Counseling Has Become The Reality In South Africa

Debt Counseling Has Become The Reality In South Africa
Debt counseling has become a popular solution due to the national credit act that was released in 2007. While the economy was thriving coeditors were quick to lend out cash and consumers at the same time were very happy to take it. What landed up happening was people were getting into more debt than they could handle and when this became a national problem, it became necessary to take steps that would be enforceable by law.
What is it exactly?
While it may initially sound like a one on one session with a psychologist once a month, there is very little of that indeed. While ultimately the point is to educate the consumer in debt management the debt counselor spends time collecting information on all outstanding debt and comparing the repayment costs to the consumer’s cost of living balance sheet. Taking into consideration the basic living expenses, a monthly amount is allocated towards the payments of debt.

Debt Review

This amount is then divided between the creditors based on percentages. So for example if creditor A is owed 50% of the outstanding debt, then 50% of this allocated cash will be paid towards that particular creditor.
Why debt counseling?
There are many advantages to debt counseling and the very first is that there is a huge benefit to the consumer who does not get badgered from all sides from creditors wanting as large a piece of the same small pie as they can get.
The second benefit is that the creditors actually get paid. Most creditors resort immediately to legal action which is costly and time consuming and many times they still fail to recover their expenses. Debt counselors negotiate discounts with creditors who are happy to receive small payments over a longer period of time.
Because there is some guarantee with debt counseling legal action is avoided most of the time keeping the consumers name off the blacklist. It s only fair that the consumer stops looking for credit and anyone n the debt counseling process is prohibited from getting any more credit until all loans have been fully paid.
What are the criteria?
A debt counselor can only negotiate with your creditors if you have an income they can work with even if you are self employed. There must be some money remaining after the very basic payments have been paid.
If I cannot pay my debts, what must I do?
Whatever you do, do not sit and do nothing. The moment you are struggling to pay monthly debts and making ends meet becomes a never ending nightmare, seek help right away. Debt counseling is an option that will make your debts manageable, your creditors happy and your life that little bit less stressful. It will keep you out of court and your phone will stop ringing. The guilt will lift as you can begin to make payments and although this may take a lot longer than you anticipated, you will finally be able to sleep peacefully at night.

When It Comes To Debt Counselling

When It Comes To Debt Counselling, South Africa Has Seen a Huge Growth in Recent Years
Debt counselling South Africa and the people in it, has become all the craze recently. While there are still many people out there who could make use of debt counselling, there are many that have taken advantage of the benefits that it offers. There are many reasons why some consumers insist on struggling with their debt instead of giving into a relatively painless procedure.
Negative connotations surrounding debt counselling
Some of the rumours include the fact that you will be blacklisted and that debt counselling is a legal procedure where you need to appear in court. Of course to avoid court becomes top of the list of priorities for most South Africans so instead they struggle to make full payments. These people are at the most risk for defaulting since they are under enormous amounts of pressure and put their livelihood at risk.
Looking at the trends in debt counselling South Africa needs to realise that drastic changes need to be made
In this country debt counselling or the need for it has become the norm. Without it many families aren’t able to make ends meet on their incomes and they aren’t able to make payments on their outstanding debts. For most people, debt is also a way of life because without it, maintaining a healthy standard of living is virtually impossible.
South Africans need to analyse their expenditure and cut down on unnecessary debt. The easier it is to get a loan the less value is attached to the money that has been borrowed. This is what happened pre 1997 when the market was booming and consumer confidence soared, banks were offering loans to one and all. The value of houses became over-inflated and when people realised that continuing to make these ridiculous repayments meant losing their homes, they had to turn to debt counselling to help manage their accounts and keep them from losing everything they had worked for.
Because of debt counselling, South Africa has had t deal with a serious economic knock
Debt counsellors do their best to be fair to the consumer as well as the creditor, taking a slice of the pie for themselves of course. As a result this leaves very little expendable income for South Africans in general. Banks have taken a knock since they are no longer allowed to give out loans to people in the debt counselling process, they have found that many others have been blacklisted and do not qualify either.
Another serious repercussion is of course the property market. Houses whose value shot up have now come down, a historical event that no one ever imagined would happen. Good news to up and coming buyers who were at an unfair advantage not having property to exchange for a deposit on a massive bond. If it wasn’t for debt counselling South Africa would have plunged into a deep economic abyss. Let’s hope that our nation has learnt their lesson.

An outline of the debt counselling process

An outline of the debt counselling process

Debt counselling processis a legal step and has been a way out for many South Africans who have too much debt. The process begins when the consumer approaches a debt counsellor and usually takes in the region of 60 days to be finalised. It is not usually recommended by either a court or by a creditor.

The application

• The Form 16 is the application form that is completed by the consumer and double checked.
• It takes about 5 days for all the creditors to be contacted, informing them that the consumer is applying for debt counselling using Form 17.1.
• The creditors are asked to confirm the outstanding amounts and they are given about 15 days to do so. If they don’t, the consumer’s figures are used.
• The debt counsellor uses this information to decide if the consumer is in fact over indebted.

Financial Freedom

The negotiations

• The debt counsellor, working with the income and the debt, begins to structure a repayment programme for each of the creditors.
• Each creditor is presented with a proposal which must be done within 25 days of the initial application. Creditors have approximately 15 days to react to the proposal.
• Once the creditor has agreed to the repayment terms which usually extend over a particularly long period of time, the matter then goes to court to be finalised.
• The consumer need not appear in court, the counsellor does this on their behalf. All the consumer needs to do is sign consent and then pay the obligated amount to the debt counsellor who redistributes the cash after taking a fee.

How can the debt counselling process protect a consumer?

The moment an individual applies for debt counselling they have usually exhausted all avenues of trying to repay their accounts, resorting from time to time to non payment and being harassed from collections departments and threatened with legal action.

Debt counselling is a 2 month process and during the first 5 days while creditors are still unaware that the consumer has applied for debt counselling, a certain amount of immunity is afforded to them if the creditor decides to take legal action during the time. Legal action is not possible from the time the applicant has entered the debt counselling process and even those who have managed to be issued with a section 129 or 130 notice are able to retreat into the safety net offered by debt counselling to avoid having to go to court.

How do the creditors benefit?

In an attempt to recover their costs creditors begin negotiating with consumers which are only enforceable by the threat of expensive legal action. More often than not creditors are unable to recoup this money. The debt counselling process is a formal process that is cemented and agreed in court. While many debts are reduced as well as repayment amounts this is one way that they can be sure that they will get their money back and save on legal costs.