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Shaking off debt review shackles

Jan 29 2013 09:54


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A Fin24 user is on the verge of breaking free from debt review, but doesn’t know which options to follow. He writes:

I have been under debt review since 2009.

I have managed to pay off six creditors since then. I currently only have two creditors that I still owe.

I will be settling my vehicle finance (R72 000) this month, which means that I will be left only with a personal loan of R22 000.

My thinking was that I want to get off debt review and settle the personal loan on my own without the assistance of a debt review company.

I have asked my current debt review company to provide me with the process of getting off debt review. The company responded by saying the following:

“Please see below the options available for you to exit debt review.

Option 1

Upon receipt of your written notification to cancel the debt review process, we can send out a form 17.4 to all the credit providers and the NCR (National Credit Regulator) advising that you are no longer under debt review.

The NCR will inform all the credit bureaus and your status will be changed. The form 17.4 states that you are no longer under debt review, but not rehabilitated.

The debt review listing on the credit bureaus will be removed within five business days but the record of your payment/default history will remain on the bureaus for five years.

It will take time to get back in the credit cycle again, and every time a credit check is done it will reflect that you were under debt review but withdrew without being fully rehabilitated, which shows lack of commitment to the process.

Option 2

We can issue a clearance certificate for you once the loan account with your bank is settled.

All the credit bureaus upon receipt of the clearance certificate must expunge from their record:
  • The fact that you were subject to the relevant debt re-arrangement order or agreement.
  • Any information relating to any default by you that may have precipitated the debt re-arrangement, or been considered in making debt re- arrangement.
  • Any record that a particular credit agreement was subject to debt re-arrangement.
You will be declared debt-free and can get credit again.

We advise that you stay under debt review and settle the loan account. Once that is done, we will get all the paid-up letters of all accounts settled and we will start the clearance certificate process.

You can be declared debt-free when all other accounts are settled. We have done this for many of our clients and this is the best possible way to have your credit record clear.”

Kindly advise if the above statement is indeed honest and true, and what would you advise me to do: continue with the debt review until the personal loan is paid off, or cancel the review and pay the loan back on my own without having to be under review?

Friedl Kreuser of Summit Financial Partners responds:

The debt counsellor's advice is correct. A debt counsellor can only issue a clearance certificate once all debt under debt counselling has been paid off.

If the consumer chooses to withdraw before clearance, credit providers, as well as the credit bureaus, must be informed accordingly.

It is also true that the voluntary withdrawal will be reflected on his credit record. Whether this carries any negative connotations depends on the relevant credit or service providers he approaches in the future.

But certainly, a clearance certificate will reflect more positively.

If the Fin24 user is so close to settling all his debt under debt counselling, I would advise him to stick it out.

Remember, he can now put all his resources towards paying off this debt as fast as possible.

As long as he remains under debt counselling, he also retains the benefit of the (presumably) reduced interest rate, which means more of his payments go to reducing the capital, and less to servicing the interest.

If he is able to pay the original instalment on the debt, or even overpay it, he should be able to settle it in record time at the reduced interest rate - and then receive his clearance certificate.

He should note, however, that there may be a delay from the credit bureaus when it comes to updating his debt counselling status, even if he is issued a clearance certificate.

I would advise that he frequently follows up with the bureau and his debt counsellor once his clearance certificate has been issued, to ensure his status is properly updated.

 - Fin24

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Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.



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