The first thing you must realise is that anyone can get into debt, it is not a crime and you shouldn't feel ashamed. Most people fall into one of two categories when it comes to debt problems:


Some people find that debt hit them like a ton of bricks when they lost their job or experienced a medical issue that resulted in the inability to work or suddenly having to pay excessive medical expenses.

Regardless of how you got into debt, it's agreed that it is easier to get into debt than it is to get out of it!

Unavoidable Debt

Sometimes, it is completely impossible for an individual to avoid debt. As mentioned above there are times when an unexpected change means you have to find a way to pay for all your old debt commitments on a lower income. Finding a new job isn't as easy as applying for one, and some people go months without a steady income. It's easy to see how these individuals can eventually feel overwhelmed by their debt commitments.

Another unavoidable situation can come about when you or a family member is injured or becomes ill. If your health insurance isn't adequate enough to cover your medical expenses, you can quickly be overcome by excessive medical bills and not have enough left over to pay for your regular monthly expenses. This scenario also has a tendency to result in a "double whammy" because if your medical issue results in your inability to work, and your inability to work causes you problems paying for your medical expenses, debt is going to take over your life.

Avoidable Debt

For every person who has unavoidable debts, there are probably 10 who are in over their heads in debt that could have been avoided. These are people who have relied on credit cards to stretch their income a little further, but over time with the help of excessive credit card interest rates and late fee charges, found that they were suddenly having difficulty keeping up with all of their expenses. Many people use credit when they don't have cash available and don't take the time to consider how long it will take to pay off that impulse purchase.

Do I Need a Debt Counsellor?

It is crucial to consider whether it is the right time for you to actually consider debt counselling.  If you in all honesty cannot pay your debts or your credit providers want to hand you over for legal collection, now is the time to take these steps.

Once you have received a letter of demand from a credit provider to settle your outstanding debt, you will have ten days within which to either contact the credit provider to make repayment arrangements, or consult a debt counsellor.

It is advisable to first attempt to enter into a payment arrangement with your credit provider, as this will save you the cost of the debt counsellor fees.  Most credit providers are amenable to entering into payment arrangements, as it saves them the cost and time of instituting legal collections proceedings.

If, however, you are unable to come to an arrangement with your credit provider, or you have reached a state of over indebtedness from which you are not able to escape, it is time for you to consult with a debt counsellor.  Once you have successfully applied to be placed under debt review, your Debt Counsellor will negotiate reduced monthly instalments with all your credit providers in order to allow you to survive more effectively on your monthly income.

Once all the outstanding obligations under the credit agreements which have been included in the debt review process has been settled in full, your debt counsellor will issue you with a Clearance Certificate. It is important to commit to the process and satisfy all the debt due and owing by you to allow you to re-enter the main credit market stream and resume your financial affairs independently.

Whilst under debt review, you will be barred from applying for further credit until such time as a Clearance Certificate has been issued. You will also not be allowed to incur any further charges under your store and credit cards.

The fact that you are under debt review will be reflected on your credit report, which will alert credit providers to the fact. This provision was written into the National Credit Act in order to protect already over indebted consumers from acquiring further debilitating credit.

Do not ignore calls and letters from your credit providers! If you do not make contact with a credit provider, or consult with a debt counsellor within ten days of receiving a letter of demand, the credit provider is legally entitled to take legal action against you for the recovery of outstanding amounts.

A successful application for debt review has the effect of barring credit providers from taking legal action against you. Such legal action will be reflected on your credit profile and the cost of the debt will be inflated with the credit provider’s legal fees for which you will be liable.

If a credit provider has however already instituted legal action against you prior to the application for debt review, the action will be allowed to run. Any payment orders, such as emolument attachment orders, made under a judgment or an administration order will also be allowed to continue.

Debt Review

You will apply to a debt counsellor who is registered with the National Credit Regulator. The debt counsellor will charge you an initial application fee of R50.

The debt counsellor will assist you in completing an application form (NCR prescribed Form 16), which is a detailed list of your income and expenditure. In order to facilitate the ease of the process, ensure that you take your identity document, recent bank statements, copies of all agreements under which you have a payment commitment (credit and service providers), as well as details of any payments that you are making in terms of judgments taken against you.

Your debt counsellor can only assist you if he is able to truthfully declare you to be over indebted. It is therefore imperative that you be open and honest with him regarding all aspects of your financial difficulties.  Best practice is to let your debt counsellor have documented evidence of all possible avenue of income, such as your salary, maintenance, alimony, commission, bonuses and possible rental income from a second property.

The same exercise is to be done in terms of your expenditure. Compile an exhaustive expenditure list, including items such as household expenditure, petrol, school fees, credit agreements, service providers and school fees.


The debt counsellor will then within five days of date of your application forward a Form 17.1 to all credit bureaux and affected credit providers, notifying them of your application for debt review. The credit bureaux will then reflect the fact that you have applied for debt review on your credit profile.

The debt counsellor will then verify all the information contained in your completed Form 16 with the various credit providers, service providers, your bank and your employer.  Once the information has been verified, the debt counsellor will be in a position to make a determination as to whether or not you are over indebted. Your entire financial portfolio in terms of income and expenditure will be taken into account.

The debt counsellor will also consider items relating to your expenditure that may be deemed as luxurious spending, such as leisure club memberships.

The debt counsellor:

If the debt counsellor does not find you to be over indebted, he will issue you with a letter of rejection. This letter will reflect the calculations upon which he based his decision and it will also advise you that you have the right to apply to an alternate debt counsellor, the National Credit Regulator or the Magistrate’s Court for an order that you are in actual fact over indebted.

The debt counsellor will also notify all registered credit bureaux and the affected credit providers that your application has been rejected. You will not longer be barred from applying for credit, or incurring charges under existing credit facilities and credit providers will be allowed to institute any contemplated legal action against you.

If the debt counsellor finds you to be over indebted, he will notify all registered credit bureaux and affected credit providers of that fact.

Assistance from a debt counsellor and the debt counselling prosess

Your debt counsellor will now negotiate revised payment terms with your credit providers. The standard process is to extend the payment terms and reduce the monthly payment amounts. In extreme cases, the debt counsellor may attempt to negotiate a payment holiday for a fixed period.

Your debt counsellor will also investigate your credit agreements for any instances of reckless lending or illegal contract provisions.

Once your debt counsellor has successfully negotiated amended payment terms with your credit providers, your debt counsellor will advise you on the method of payment.

Most debt counsellors make use of a payment distribution agent that distributes the amounts due to the various credit providers from your salary to each credit provider.

Once all your obligations under all the credit agreements included in the debt restructuring plan have been settled in full, your debt counsellor will issue you with a Clearance Certificate. The fact that you were under debt review will be removed from the credit bureau and you will once again enter the main stream credit market.

It is extremely important that you not renege on any payments due under the revised payment schedule. Credit providers are allowed to terminate the agreement reached under the debt review in the event that you do not adhere to the payment plan and skip payments. Such a termination will allow the credit provider to institute legal action against you.