Overwhelmed by debt? Applying for debt review can help

Sometimes borrowing money is a key part of life, for example, if you want to buy a home. But despite your best efforts to juggle bills and living expenses, you might find yourself coming up short.

Have your financial circumstances changed, causing you to miss your monthly payments? If so, and you don’t qualify for a debt consolidation loan or your lender is unable to come up with a better repayment plan, you might want to consider applying for debt review.

The National Credit Act makes provision for over-indebted consumers to apply for debt review with the help of a debt counsellor. It’s a debt rehabilitation program that protects consumers from creditors who want to remove their assets.

To qualify for debt review, you must be employed and earn a regular income. You must also be classified as “over-indebted” and meet certain criteria set out in the National Credit Act.

An over-indebted person is unable to meet all of their payments on a monthly basis because their expenses exceed their income. A registered debt counsellor will determine whether you’re over-indebted or not.

The first thing you need to do is contact a debt counsellor who will assess your outstanding debt and financial situation. If you’re eligible to begin the process, they will contact your creditors and let them know within a matter of days that you’re undergoing debt review.

The debt counsellor will then negotiate with your creditors on your behalf for better interest rates and terms on your outstanding debt.

If you’re eligible for debt review, instead of making multiple payments each month, you’ll make a single monthly deposit to a payment distribution agency that’s responsible for paying creditors on your behalf. The debt counsellor will also draw up a monthly budget so that you have a structured plan to become debt-free.

Remember that the debt review process can take up to five years, so it requires dedication and commitment. At the end of the process, your debt counsellor will give you a clearance certificate explaining that you’ve settled your debt. This certificate will also be sent to your credit providers and credit bureaus. Once the credit bureau receives the certificate, they’ll clear any red flags from your record, and you’ll be able to borrow money again.

Yes, this will have an impact on your credit score. You'll be listed at all credit bureaus as being under debt review, and you won’t be able to apply for more credit until you've paid your restructured debt and are issued with a clearance certificate.