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Earlier this year, as part of the National Credit Amendment Act, new guidelines were issued that outlined when a person may exit debt review.
Previously, you could only exit debt review once you had paid all your rearranged debts in full and had received a clearance certificate. This also included a home loan if it had formed part of the debt review application.
A significant change is that you can now exit debt review even if your bond is not fully settled, although you would have to show that you have the financial ability to meet those future mortgage repayments – or any other long-term agreement. There must also be no outstanding payments on the bond and all your other outstanding debt must have been settled as per the debt review rearrangement order.
You can also apply to exit debt review if you have a significant change in your income. If your financial situation has improved to the extent that you are able to meet your financial obligations as they were prior to debt review, and if you have not fallen behind on your debt review payments, you can apply to the courts to consider withdrawing from debt review. However, it is important to note that the original debt contracts revert and all your contractual obligations must be met.
How to withdraw
It is important to note that a debt counsellor does not have statutory powers to terminate or allow you to withdraw from the debt review process. The consumer has to go to court to obtain this.
You must approach the court to rescind the order or to apply for an order that declares that you are no longer overindebted. Upon receipt of such an order, a debt counsellor will notify the credit providers of the withdrawal with a document called Form 17.W.
Direct payments – know your rights
Some consumers who are considering debt review are concerned about how to ensure that the payments they make are correctly paid to the creditors. The good news is that in terms of the National Credit Amendment Act, a consumer has the right to make direct payments to credit providers and not make use of the services of a payment distribution agent (PDA). According to the National Credit Regulator, election by consumers to make direct payments to credit providers cannot be construed as noncooperation and should not be used as a reason for suspension of debt counselling services.
When you apply for debt review, you would need to sign a document called Form 16, in which you would also need to indicate whether you wish to pay your credit providers directly or via a PDA.
After withdrawal
. You remain responsible for making all payments in full and on time.
. You will have to provide monthly proof of payments to the debt counsellor for the counsellor’s records, and to enable the provision of aftercare service.
. If you miss a payment or pay late, you will still risk the termination of the debt review by the credit providers.
. Debt counselling fees are payable to a debt counsellor for services rendered and this includes payment of aftercare fees.
. Where the debt counsellor has suspended provision of a service, a consumer must provide proof of settlement letters from credit providers for a debt counsellor to issue a clearance certificate
