Things You Need To Know about Debt Counselling
Commitment To The Process
You need to be committed to the programme and understand that there are still many annoying factors and tactics that creditors use. This process is not perfect and is still in an infancy stage.
Without the need and desire to want to help yourself, no debt counsellor will be able to assist you. Admit certain financial mistakes, learn how to correct them by cutting down on living expenses, learn how to live on cash.
Acknowledge responsibility and take accountability; it is YOUR debt and not your debt counsellors.
This process is for consumers who want to pay their debt but cannot afford to. You need to stick to your payment plan without fail. The first breach in your payment plan is immediate termination under the latest judgment that was delivered on 27 May 2011.
Choosing Your Debt Counsellor
Choose the right debt counsellor that you can work with. You need to trust your Debt Counsellor and understand that this is not just a service but a relationship. Like any relationship, it has to work both ways. You need to be upfront and 100% honest with your Debt Counsellor. If problems arise, you need to be pro active and communicate with your debt counsellor's office immediately. No debt counsellor can determine the percentage reduction in a consumer's debt repayment until they have been interviewed by the debt counsellor.
Consumers should not forget that when they appoint a debt counsellor, they are placing their homes and cars into hands of people that they need to work with and trust.
It is always best to meet with your debt counsellor prior to making a commitment into using their services.
Bigger v.s Smaller Debt Counsellors
Smaller DC's have fewer clients; can offer a more personalised service; are easier to speak with directly and often have the time to go the extra mile; you would generally get to meet and know your DC. They usually work from a small office or home with no or minimal signage which can offer a more private feel.
Bigger DC's have more clients and therefore more admin staff to assist applications and admin duties; usually have in-house, national attorneys; can offer National representation; do more online applications than personal interviews; at times, it is more difficult to speak directly with the DC. Normally have big office space with highly visible signage.
Creditor Providers Debt Review Departments
In most cases, these departments are separated from the rest of the other divisions. This means that the debt review systems are also separated from their "normal" systems. This makes systems and internal processors far from perfect.
Some creditors have massive problems in capturing data; liaising and pulling through information from the various product divisions; information is disparate and often differs from your debt counsellor's information.
Even after a court order is obtained in the debt review matter, creditors can take longer than 6 months to update their systems and your statements, as per the court order.
This internal separation also makes for all those late night call centre calls, or harassing phone calls more than 3 times in one day. It also explains why, at times, your debt counsellor informs you of one thing, yet your creditors say something else.
Bigger credit providers have thousands of people working for them. The debt review departments rely on information from the various internal product divisions. When a problem / query arises, it normally takes the debt counsellor 5 - 10 business days to get a response because of the various internal divisions that need to give input back to the debt review division. Even then, sometimes the response times are not adhered too and it can take much longer to resolve.
There is often a breakdown in communication within these various divisions. This can cause disruption for any consumer. It is always best to advise your debt counsellor and place all requests in writing for future reference.
Your Debt Counsellor Is Human
Treat your debt counsellor with respect and dignity. A Debt Counsellors job is thankless and one that is bursting with daily frustrations beyond belief. They are consistently placed in high pressure and stressful situations in which they need to find resolutions or be faced with possibilities that often give them sleepless nights.
Be kind and work with your debt counsellor to get better results.
Never forget who owns the debt and who is trying to assist with restructuring the debt. It can never be the debt counsellor's fault for you being in a financial mess. It is only ever your fault, just as it can only ever be YOUR debt.
It is of utmost importance to have understanding for the events that occur at your debt counsellor's office. Along with all the many court issues, concerns and emails that they are flooded with on a daily basis, not to mention the continuous ringing of the telephones, you may begin to see why it can be difficult to get hold of debt counsellors themselves.
Most debt counsellors have assistants who have been specifically trained to help consumers. It is always a good idea to speak with the assistants, as often concerns, issues or queries can be sorted out immediately.
Payment Distribution Agencies (PDA's)
This selection is just as important as choosing your debt counsellor, as reliability and consistency is of utmost importance.
You must use one of the four PDA's and there is a cost involved.
You must also get monthly statements from your debt counsellors or PDA. Unfortunately, there are currently only two PDA's that are successful in helping consumers in receiving their monthly PDA reports.
This is your money and debt; know where your money is going and how it is being distributed towards your creditors.
By receiving your PDA reports, you can place a stop to any creditor calling you, informing you that your debt counsellor is stealing your money / or when they inform you that no payment has been received. After all, this is your debt and you need to keep tabs on your money.
Consumers must not pay their monthly rehabilitation fee into their debt counsellor's personal accounts.
It is always advisable to ask your debt counsellor for their PDA contact details so that you can do a check if required.
Some PDA's have trust accounts in the debt counsellors / business name. Only the debt counsellors clients pay into the trust account. Debt Counsellors do not have access to take money out of the PDA trust accounts; they can however view client's payments into the account online. Speak to your debt counsellor if you are unsure.
Make sure your debt counsellor is using an NCR accredited PDA.
The Induplim Rule
This rule is one of the most contested by credit providers. It has been challenged in the courts, including the highest court in South Africa.
This rule does not apply to any credit agreements prior to 2007.
This ruling simply means that from the day you were placed under debt review, your interest on your arrear amounts, may never exceed the outstanding capital owed to the credit provider. In other words, if you owed R1000.00 on an account, when the interest has increased to R1000.00 the debt and the interest stops running.
This rule is one of the most powerful for consumers within debt review, as it stops debts from spiralling out of control and helps the consumers to pay the debts back within reason.
All debt is included into this ruling, including bonds and vehicles.
The Prescription Rule
This rule is a saving point for many consumers if they only knew about it. This rule is very simple and one to always check when you suddenly get those unexpected phone calls on old debt that you had forgotten about from Attorney's, Collection Agents or even the creditor providers themselves. Before you admit to the debt, sign an Acknowledgment of Debt (AOD), make a payment arrangement or pay one single cent, remember that if you have not paid this debt for 3 years or longer and if there is no judgment against your name on this debt - this is a prescribed debt and this prescription rule ALWAYS applies without exception.
It is your right to inform the person calling you of this fact and to request a statement of the last 6 payments made against this debt. If they cannot send you proof thereof, it is because they do not have it. If they cannot prove to you that you have indeed paid within a 3 year period, the prescription rule applies.
However, should you be caught and make a payment towards this debt, even though it has prescribed, the debt becomes live and enforceable again.
Do not get caught on prescribed debts and always request proof of your last payment in writing should there be a disagreement in proving your case.
The Basic Debt Counselling Process
Make an appointment with the Debt Counsellor. The consultation will take anything from 1 - 2 hours depending on the complexity of the case. This application can also be completed online with various debt counselling firms.
You will need to take the following with you;
- A copy of your ID.
- Your latest payslip.
- 3 months bank statements. If you are self employed 6 months bank statements.
- Latest copy of your creditor statements.
- All legal letter, summonses, demands.
The Debt Counsellor will assess the situation, ask you to fill in the application form also known as form 16, discuss your budget and explain the process along with fees and legal implications.
If you are over indebted, the debt counsellor will give an estimated amount of what you will need to pay monthly. This is known as your restructuring amount.
Note that there are times when the budget will need to be cut again to accommodate creditors. You need to agree to a restructuring amount and be aware that it could change.
The debt counsellor will then register you onto the NCR debt help system.
Form 17.1 and or 17.2 will be sent out to all creditors within 5 days of applying for debt review.
Creditors respond to the debt counsellor with certificate of balances (COB) within 10 days after 17.1 and or 17.2 being sent out.
Budget is finalised and proposal sent out to creditors.
Matter referred to court while the debt counsellor negotiates with the creditors.
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(With thanks and appreciation to The Debt Counselling Industry - www.theDCI.co.za)