What Does Debt Counselling Mean?
What Does Debt Counselling Mean?
You may have heard a lot of people talking about debt counselling and Debt Counsellors. It seems to be a good thing but you may be wondering what exactly does debt counselling mean?
Getting Help from a Trained Debt Expert
If a South African consumer is having a hard time paying back their debts as well as covering all their monthly needs they are said to be “over indebted” or have too much debt. This means they qualify to get help from a Debt Counsellor.
Debt Counsellors are trained experts who specialize in dealing with debt who are registered with the National Credit Regulator (NCR). The name explains what they do. These experts counsel people about their debt.
One of the things these debt experts specialize in is helping consumers look at their monthly budget. Many consumers do not have a realistic, sustainable budget and are living month by month with no plan. A proper budget looks at total household income and regular monthly expenses as well as all a person’s debts.
What Does Debt Counselling Involve?
If a consumer approaches a Debt Counsellor for advice the Debt Counsellor will ask them for the following information:
- Proof of Income
- Monthly Bank Statements (to show spending)
- Proof of Address
- Marital Status
- A list of creditors and what is owed (or statements from each credit provider).
- Debt Counsellors will also ask the consumer if they can draw a credit Bureau report which has additional information about the consumer’s debts.
The Debt Counsellor will then discuss with the consumer how they got themselves into debt and what plans they have made to try to cope with their debt.
The Debt Counsellor will then help the consumer look at ways to change their spending and saving. They will also discuss what options the consumer has to repay their debts in a manageable way.
If the Debt Counsellor feels that the consumer is over-indebted and could benefit from a formal debt review they will then ask the consumer if they would like to formally apply for debt relief (debt review).
If the consumer formally applies then the Debt Counsellor will then notify the National Credit Regulator (NCR) that the consumer has applied for help. The NCR will then notify the various credit bureaus that the person has started a debt review.
The Debt Counsellor will then officially ask each of the consumer’s credit providers for documentation about the consumer’s debts. The Debt Counsellor will then begin to make proposals to all the credit providers and to the consumer about how the debt can be settled more manageably.
The Debt Counsellor has then done the official ‘debt review’.
What Happens Next?
Next, the Debt Counsellor will take all that information and their proposal and submit it to a local Magistrates Court. The court may then turn that proposal (or something very similar) into a formal debt restructuring court order.
‘the Debt Counsellor will take all that information and their proposal and submit it to a local Magistrates Court’
Consumers who enter debt counselling find massive relief from stress as credit providers call off their collections agents. The court order rearranges the consumer’s monthly debt repayments to much more realistic smaller repayment amounts.
Because the monthly debt repayment amounts are smaller than before, it can take a bit longer to settle the debts. Many plans are arranged over 60 months (5 years) and credit providers commonly lower or drop the interest on the accounts to help consumers settle the debt within that time period.
Ongoing Help From Your Debt Counsellor
During the process, while repaying their debts, the consumers can get advice or assistance from their Debt Counsellor. This is very helpful if the consumer perhaps has a dispute with a credit provider over a balance or needs advice on how to deal with any financial crisis along the way.
‘During the process… the consumers can get advice or assistance from their Debt Counsellor’
At the end of the process, the Debt Counsellor also plays a big roll in helping the consumer get the credit bureaus to remove any reference to debt review from their reports. This helps the consumer get access to new credit once the debt counselling is finished.
Read More: How can i find a Good Debt Counsellor?
Debt Counselling is help and advice given to consumers by trained Debt Counsellors about dealing with their debt. Primarily, this is through a comprehensive debt review process. They assist consumers with better budgeting, creating debt restructuring proposals to court and ongoing debt advice as consumers in debt review pay off their debts over time. They also help consumers eventually get their credit bureau records cleared once the process is done.
Read More: Is Debt Counselling Free?
Images: courtesy of www.freepik.com created by katemangostar