What is Debt Rescue in South Africa?

Are you tired of spending your nights worrying about how much debt it is? You may be wondering “How on earth will I pay off all my debt?”. There are options that will help you sleep better at night and get rid of your debt. Debt relief might be right for you.

What is the process of debt rescue?

To help consumers with high debt, the NCR (National Credit Regulator), introduced debt relief. A debt counselor can help you budget and repay your debts at an affordable rate.

Your debt counsellor will take all of your debt into account and negotiate with creditors to lower the monthly repayments as well as lower interest rates, so you pay less each month. You will be given a personalised repayment plan so that you have enough money to cover your daily living expenses.

Once creditors agree to the revised repayment plan, you can start the debt review process. You will be unable to sue your creditors and your assets will be protected by the National Credit Act.

Types of Debt Rescue

There are many ways to rescue your debt. Sequestration, which is also a type of debt rescue, is where you sell some assets to pay off your debts. Creditors then make arrangements to pay the rest over a specified period.

Your credit score will be affected by the type of debt rescue you choose. You should also consider the cost associated with each. Many debtors do not realize that debt review isn’t a free service. In addition to the monthly fee to maintain your debt review account, and the distribution company fee, you will also need to pay the attorney fees and debt counseling fees.

Debt review can be an alternative to administration. If your total debt is less than R50 000, you can only place it under administration. Debt review is usually recommended as a way to save your debt.

Sequestration may be an option if the debt review takes longer than five years and you have immovable assets. Your insolvent estate will be placed under the supervision of a curator, who will distribute the proceeds from the auction sale to creditors. This allows you to get rid of as much as 80% of your debt and pay the rest off in cash, or over an 18-24 month period, if agreed upon. After four years have passed from the provisional sequestration date you can apply for rehabilitation. However, it is possible to get rehabilitation earlier in certain cases.

You can still enter into credit arrangements under sequestration with the permission of the curator. However, it is not recommended. Once the order has been issued, all debts incurred prior to the sequestration will be discharged. Creditors cannot bring any further legal action against you.

You are protected from creditor actions under debt review as long as your monthly consolidated amount is paid. The court will then distribute the funds among the creditors. Creditors can take legal action against your to demand payment of the outstanding debt or interest if you are late or non-pay.

The debt counsellor can negotiate lower interest rates for debts through debt review. However, these results are not guaranteed. The process does not include service contracts. After you have paid off all debts, you will receive a debt clearance certificate. You can then only enter into credit agreements.

Be aware that administration fees are often high and part of each instalment. Sequestration is a debt relief option that will result in the loss of your assets such as immovable property. Your attorney can negotiate a lower price and you will not have to pay interest. You may also be able to continue driving your vehicle. This is something that should be discussed with an insolvency attorney.

Debt rescue helps the debtor pay off his or her debts and get back on track. This is possible with sequestration and debt review in relatively short time frames, especially when you consider that a home mortgage can last from ten to twenty-years.

Many consumers are unaware that not everyone is eligible for debt management, administration, or sequestration. For debt review, you must have insufficient income to cover the monthly installments to creditors. Because you will be paying monthly, you must have a monthly income. Therefore, you must not be indebted. You will need to find another way to reach out to your creditors if you are not eligible. This will prevent you from losing your assets. You will still need to pay the application fee, and the rejection fee for debt evaluation, if your application is denied. Your creditors could have already taken judgment against your creditor by this point. If your debt is not more than R50 000, the court may allow you to be placed in administration.

Sequestration comes with costs. It is only possible if you have sufficient assets and a monthly income to cover the cost of the sale. Our attorneys can discuss the benefits. The creditor’s status will determine how much or little the rand must be made available to creditors.

Before you embark on any debt relief path, we recommend consulting with our insolvency lawyers. Our attorneys will examine your financial situation and provide legal advice on the best way to eliminate your debt.