Your Responsibilities While Under Debt Review
Debt review is at its heart a simple idea: A Debt Counsellor figures out what a consumer can realistically and consistently afford to repay towards debt each month. Then they suggest to the credit providers and ultimately the court how the funds can best be split up between credit providers in a fair way. The payments will be smaller than before (normally) so the debts will naturally take longer to settle. The court then adjusts the repayments to make things more manageable and consistent for the consumer.
The actual process however is a complex one with many roleplayers and many, many moving parts. More than that, as regulation and legislation has changed over the years the process has had to be adjusted. There are also different schools of exactly how to do the process most efficiently and to the benefit of all parties.
‘When consumers first enter debt review they may actually know only the broad strokes of how the process works’
When consumers first enter debt review they may actually know only the broad strokes of how the process works. This is because they receive a high level description of the process. To try to explain the ‘nuts and bolts’, down to the smallest detail, would be very hard to do and extremely time-consuming for all involved.
So then, how much does a consumer need to know and what responsibilities rest on their shoulders during the process?
Just How Much Do You Need To Know?
Debt review can sometimes be presented or advertised as a way to “pay less towards your debt each month”. Who wouldn’t want to pay less towards their debt each month? It may be presented as an easy process that consumers can use and just leave if it doesn’t work for them. This is not entirely accurate and presents only the barest minimum of information. Consumers need to know a lot more about the process than that.
If you are thinking of entering debt review and getting debt counselling then you need to know:
What exactly is debt review and debt counselling?
What kind of counselling will you receive?
What exactly happens during the process?
How will it change your debt obligations?
How much it will cost you?
What does a PDA do and does the Debt Counsellor suggests you use one (or not) and why?
How are the court and attorneys involved?
How you leave the process? When can you leave the process?
What is the impact of the debt review on your access to credit during the review?
Roughly, how long will the process take you?
You can also ask for copies of the contract documents from the Debt Counsellor to see exactly what their services are.
Given this basic information, you should be able to decide if the process is right for you or not.
Then having made that decision you have to decide which Debt Counsellor you want to work with. Normally, you will have learnt all the above information from a Debt Counsellor that you re talking to but you should not feel pressured to sign up with the first Debt Counsellor that you chat with. Do some research about them (google their company name and visit Hello Peter, check the NCR database to make sure they are legitimate etc).
What Should You Be Doing During Your Debt Review?
Once you have committed to the process there will be an urge to sit back and let the stress of worrying about your debt fade away. It is a great feeling to have someone, who knows what they are doing, help you deal with your debt. And while that is something you can do, you should keep in mind that the debt being restructured is your debt not the Debt Counsellors so, you shouldn’t stop paying attention totally.
In fact, you can use the start of the debt review as the start of a new financial chapter in your life. One where you have control over your finances for the first time in a long while.
During your debt review you should feel free to:
Check in with the Debt Counsellor regularly to get updates (especially in the critical first few weeks)
Check in with credit providers to make sure they are aware of the debt review (don’t freak out if their computers don’t have all the facts at first)
Get a copy of the proposed repayment plan (you can even get a month by month breakdown)
Get a copy of the court order when it is available
Check your Payment Distribution Agent (PDA) is making all the correct payments according to the plan or court order
Ask your Debt Counsellor for financial insight into situations that come up and challenges that present themselves. They will be able to tell you how it impacts on your financial future. Always stay in contact with your Debt Counsellor and let them know about anything that might impact on your situation.
‘Always stay in contact with your Debt Counsellor and let them know about anything that might impact on your situation’
Over time you should also make an effort to learn to:
Shop smart and avoid impulse buying;
Budget for and track your spending;
Better understand financial matters & debt review (by reading magazines like Debtfree Magazine);
Find ways to cut costs and increase income;
Plan for annual expenses and plan future purchases (by saving)
The list could go on and on but you get the idea. You can and should be involved and interested in financial matters and how they might impact on your future financial wellbeing. Don’t fall asleep at the wheel and ignore your debt review. This can easily lead to disappointment simply because you have not been keeping an eye on how things are progressing.
Do Your Part
If you get enough information to decide to enter debt review and if you find the right Debt Counsellor to help you with this then be sure to stay involved in your own debt review.
Stay up to date with your financial situation and track your progress over time. Keep in regular contact with your Debt Counsellor, attorneys and PDA. Check your figures regularly and stay up to date. This and other similar good financial habits will help you for years to come long after your debt review finishes.