The National Credit Act 34 of 2005 gave rise to the establishment of the Debt Counselling profession in South Africa. In terms of Section 86 of the Act, an over-indebted individual may apply to be placed under Debt Review with Debt Review offering the following remedies:

• Credit providers are unable to take legal steps against the consumer while under Debt Review.
• Re-arrangements can be made regarding the manner in which payments must be made by the consumer and distributed amongst the affected credit providers.The consumer’s obligations can be re-arranged by extending the period of the agreement and reducing the amount of each payment due.
• The Debt Counsellor may apply for certain credit agreements to be set aside or altered on the basis that they were recklessly provided.

Considering the current economic situation, Debt Review appears a marvellous idea, and in theory, one can obtain leeway in dealing with an intimidating amount of debt. However, it can also be an unopened parachute if one fails to pay attention to the detail and take the correct steps, leaving you dangling upside down in a thorn tree.

Many consumers fail to recognize that Debt Counselling is not a charitable service. There are specific fees which are applicable, and though they may seem insignificant, they can all add up. Failure to actively participate in one’s rehabilitation, research the options or consequences of certain decisions, make responsible changes to one’s lifestyle, or abide by the restructured agreement, can result in a substantial increase in your debt obligations. Accordingly, it is crucial that before starting a Debt Review process, you as consumer do the following:

• Research debt counselling – read about it on the internet, ask Debt Counsellors questions, speak to acquaintances who have applied for Debt Review and in general acquaint yourself with the debt review process.
• Change your lifestyle – shop at cheaper stores, cut down on luxuries such as satellite tv, alcohol, entertaining, and if necessary, even downgrade your vehicle or residence.
• Ensure that your Debt Counsellor is registered with the National Credit Regulator.
• Disclose all debt that you have to the Debt Counsellor, and ensure that you abide with the restructured payments and obligations placed on you. Failing to do so may result in a credit provider applying for the cancellation of your Debt Review.

In addition to the abovementioned, it is imperative that one knows and understands the effect of the fees that you will have to pay in terms of the Debt Review process. The fees are fixed in terms of the law, and if your Debt Counsellor is charging in excess of the set fees, one can report them to the National Credit Regulator or Credit Ombud, whose contact details are easily available online. The standard fees as of 2011, until such date as they are altered are the following:

• Application fee is R50
• Rejection fee is R300
• Restructuring fee is capped at R3000 for a single application, and a maximum of R6000 for a joint application.
• A monthly “care fee” is 5% on one’s monthly instalment for the first 24 months, and 3% thereafter, but capped at R400 per month.
• A legal fee of R750 for the consent order which needs to be obtained in the Magistrates’ Court.
• Should one withdraw from Debt Review after the restructuring process has begun, one is responsible for 75% of the restructuring fee.
• And finally, the element that is often overlooked – is interest on these fees.

It is important to understand that applying for Debt Review is not in itself a total solution for your debt problems. It also asks of you to take responsibility in rehabilitating yourself, understanding the process and participating therein. A casual and irresponsible attitude may result in your debt increasing rather than decreasing and as reduced payments means the payment of debt over a longer period, a committed attitude for the long haul is essential to making the process work.