If you are over-indebted, it is likely that your debt will be causing you stress and you may be wishing for relief. One option to consider is debt review – or debt counselling – which is an agreement between you and your creditors that you will pay a consolidated monthly repayment amount to a payment distribution agency, who will then pay each credit provider on your behalf.
Debt review helps consumers to manage their debt more effectively and is designed for those who are unable to afford their current monthly repayments. This will not only make it easier for you to keep up with your payments but will also save you money in the long run as you will be paying less interest than you currently are.
When you enter into debt review, the terms and conditions are set out in a legal document called a ‘Debt Repayment Plan’ which will be negotiated by your debt counsellor with your creditors. This agreement will specify how much you are going to pay each month and how many years your debt review will last for. Once your debt is paid off, you will be issued with a clearance certificate, clearing your name on the consumer bureau database and allowing you to apply for new loans.
The process of debt review also protects you from legal action by your creditors if you continue to meet your unified and consolidated debt repayments. However, it cannot protect you in cases where a creditor has already started pursuing legal action against you. This is why it is important not to procrastinate on debt review until you are faced with one of your creditors taking legal action against you.
Another benefit of debt review is that you will not be able to access any additional credit whilst under debt review. This is a good thing because it will help you to focus on clearing your existing debt and prevent you from getting into more debt. If you are finding that your creditors are not honouring this restriction and you are struggling to keep up with your debt reviews payments, you can complain to the National Credit Regulator using a form 29 complaint.
During the process of debt review, you will have to work closely with your debt counsellor in order to complete a debt management questionnaire and standard financial status form, and submit these documents to your creditors. Your debt counsellor will then use computer programs to make phone calls, faxes and emails to your creditors in order to negotiate the best possible deal with them. Creditors are not obliged to accept the proposals but if they do, you will be notified by the debt counsellor, and the re-arrangement of your debt repayment instalments will commence.
It is important to remember that if you stop making your debt review payments, the agreement will be cancelled and your creditors can start pursuing legal action against you. It is therefore important to remain committed to the process and ensure that you do everything in your power to adhere to your repayment plan.