DEBT REVIEW MAY BE THE BEST OPTION FOR YOU

DEBT REVIEW MAY BE THE BEST OPTION FOR YOU

People who have difficulty paying their monthly expenses are desperate for debt review and don’t always weigh their different options. What are the Options?

  1. Debt Administration: which only looks at unsecured debt under R50 000. This means that ones home loan and vehicle finance are not included for protection. Another disadvantage of administration is the R50 000 limit of the debt amount. Administrators only pay funds over to credit providers every 3rd month – fees and commissions are high and most people entering the administration process will be worse off.

 

  1. Consolidation Loan. Often seem to be the best option but people borrow money to pay off debt and therefore put themselves into even more debt. With consolidation a person only shifts debt from one place to another. Most people will not qualify for a consolidation loan. There are 2 ways in which a person can consolidate his debt. If the individual owns a property and has liquidity in the property; meaning that the property is worth more than what is still owed to the bank. That could be used to finance other debt. The other way in which to consolidate is to take out a consolidation loan at the bank. This typically has a limit of R50 000 and the consumer must be able to afford the instalment on top of their existing debt instalments. For most people R50 000 is not enough anyway and the interest and fee charges are also high.

 

  1. Debt Mediation/Debt Review/Debt counselling on the other hand is a process aimed at people who are over indebted and unable to cope with monthly financial obligations. When a person enters the debt review process he is protected against legal actions from creditors. We take all legal issues and negotiations from the individual’s shoulders, he says. Being in Debt Review is not a shame, its a way to get out of debt step by step and to actually see the light at the end of the tunnel.

 

  1. Sequestration. It may sound like the ideal solution to get out of debt but the person who is sequestrated loses almost all of his assets because they are sold to cover the total of the debt. Additionally, the individual is not allowed to get credit for 5 years after being sequestrated. The sequestration court order stays on the court record for 30 Years. This is the last resort scenario and allows citizens to make a fresh start.

 

  1. Civil Action to Collect the Debt (Including Statutory School Fees)

If you ignore the letters and summons from say your 6 Credit Providers (Cp’s) (or their debt collectors/agents) and the Schools, you will then have 6 separate default judgements taken against you, each with interest and costs and this lasts for 30 years. It is likely to double up the value of the amount outstanding. Your employers with be ordered to deduct the amounts due via a EAO (Emoluments Attachment Order) and pay over the Cp’s and to the Schools or their collection agent. These judgements reflect on your Credit Report as well and additional costs are likely to then have these removed when the debt has been settled.

Why is Debt Mediation/Debt Review/Debt Counselling the Best option

Debt Mediation/Debt Review offers exactly what a consumer needs to take control of his or her debt. Besides offering immediate financial relief, it combines all monthly instalments into one single reduced instalment. When someone enters the debt review process, credit providers can’t take legal action against them on arrear accounts. This extends to secured debts such as home loans and vehicle finance. Assets are also protected from being repossessed and sold on auction. After the successful completion of the debt review process, a clearance certificate is issued to a consumer. This certificate is sent to all credit bureaus to remove all information pertaining to the accounts that were subject to the debt review process. The National Credit Act is there to assist over indebted citizens – make use of it. Parliament saw fit to introduce it for its citizens

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