What Does Debt Rescue Mean?
Do you have sleepless nights thinking about how much debt you are in? Wondering “how on earth am I going to pay off all of my debt?” There is an option that can help you to sleep easier at night while you become debt free! Debt rescue may be the right choice for you.
How Does Debt Rescue Work?
The NCR (National Credit Regulator) introduced debt rescue to help over-indebted consumers better manage their finances and honour their debt repayments. Debt rescue is a process where a debt counsellor helps you to budget and repay your debts at a more affordable rate.
Your debt counsellor takes all your debt into consideration and negotiates with your creditors to reduce the monthly repayment as well as lower your interest rates so that you pay less each month. A personalised repayment plan is worked out, so you have enough money left over to pay for your day to day living expenses.
Once your creditors accept the revised repayment plan you enter the debt review process and get started on your debt free journey. Your creditors will no longer be allowed to take legal action against you and your assets are protected under the National Credit Act.
Let Meerkat Rescue You
Meerkat can help you to reduce your monthly repayments and rescue your finances. We are always looking out for you every step of the way. You can contact us if you have any questions and we will help you along your path to financial freedom.If you are looking for debt rescue Contact us today!
The Meerkat Debt Management Process
1: You will go through a budget with one of our experienced consultants. This will allow us to assess your financial situation.
2: Your debt counsellor will determine if your monthly expenses are more than your income. This will determine your debt rescue plan.
3: You will be placed under debt review and your credit providers will be informed.
4: Now you only have to pay one reduced repayment towards all your debt every month and have enough money left over to afford your living expenses.
5: The process is finalised in court and you'll be on your way to a debt-free future.
Understanding the debt review process
Debt review is a process where a debt counsellor assesses your outstanding debt and implements a restructured debt repayment plan on your behalf. A new monthly payment plan is drawn up by your debt counsellor. When you are undergoing debt review, you are legally protected by the National Credit Act (NCA) and your creditors are no longer entitled to hassle you to repay your debts. All communications are managed by your debt counsellor on your behalf.
How does debt review work?
You should start by searching for a suitable debt counseling company that will help you through your debt review journey. Make sure you use a registered debt counsellor with the National Credit Regulator (NCR). You can search and review their credentials and status here.
Once you have found a debt counsellor that you are comfortable with, he/she will review your current budget. They look at your income and all your living expenses as well as all the existing debt you have.
How do you know you are possibly over indebted? If your current debt repayments are more than half of your income then it is an indication that you are over indebted and will benefit from the debt review process. Your debt counsellor will pull a credit report to check your loan balances and interest rates that you are currently paying and look at where they can negotiate reductions with your creditors.
Once they have drawn up your existing budget and provided a new budget that you can actually afford you are sent a formal application form to sign. This is known as a Form 16. This will detail your income and necessary expenditure and declare that you are formally applying for debt review.
The application form also covers the fees that are needed to cover the administration of the process as well as the legal fee required. These fees are not in addition to any monthly payment as your creditors agree that the 1st 2 months payments are to go to the debt counsellor and they will then be paid from the 3rd month.
You’ve signed the Form 16, what next?
Once your debt counsellor receives your signed application form back they will request copies of your bank statements and ID to send off to your creditors.
A notice known as a Form 17.1 is sent to all your creditors to advise that your financial situation is being assessed. This notice also requests that your credit providers issue formal certificates of balances (COBs) to confirm the actual outstanding amount according to their records.
It is during this phase that you are listed on the National Credit Bureaus (NCR) Debt Help database as proof that your debt review application has been submitted. You are now legally protected from any further legal action taken by your creditors.
On receipt of the COBs from your credit providers ( 5 days later), your debt counsellor will complete their assessment to determine your level of overindebtedness. This means you are unable to meet your credit obligations as they currently stand.
Your debt counsellor then issues a Form 17.2 which is your new repayment plan proposal and likely includes significant interest rate reductions to make your debt more affordable. All credit bureaus are notified and this means that you are now effectively under debt review. You will no longer have access to credit to prevent taking on even more debt that you cannot payback. The repayment proposal displays a list of all your credit providers, your current outstanding balances as per the COB's received, the offered instalments, interest rates as well as the new repayment terms.
Your debt counsellor and credit providers then negotiate a repayment plan, as soon as they reach an agreement, this matter is then referred to the National Consumer Tribunal for a consent order.
If there are one or more credit providers that do not agree to this new repayment plan, then the matter is handed over to the magistrate court.
Debt review process - make your regular payments
The debt review process is a legally binding contract and you must commit to making your regular reduced monthly repayment.
Debt counsellors do not handle the money transfer themselves but use a Payment Distribution Agency (PDA). PDA’s are companies that distribute your funds to all your creditors according to your new repayment plan until all your debt is settled. The duration to pay back your debt will depend on the outstanding balances but it is usually a maximum of 5 years.
If you have any problems meeting your monthly commitments alert your debt counsellor immediately. They can issue a change of circumstances report if your income is negatively affected by retrenchments.
Most unsecured loans come with credit life insurance that will continue to pay your debts in the case of retrenchment, death or disability. Make sure you know what cover you have in place.
Once you have paid off your debts according to your new repayment plan your debt counsellor will issue you with a clearance certificate. This is sent to all credit bureaus in South Africa and confirms that you are now debt-free. Your credit record is updated to reflect that you are no longer under debt review and your record is cleared of any negative information.
Well done on getting to this stage, it's a great achievement and a key step on your journey towards financial freedom.