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Debt-ridden single mom of three seeks advice

Oct 13 2016 07:46
Liziwe Ndalana

A Fin24 user who feels overwhelmed by debt as a single mother of three, seeks expert advice on what to do.

She writes: "I have debts that are more than my income. I applied for the debt review but I am also unable to make payments according to the payment plan. I want to pay up my debts so that I can build a home for my kids. I am a single mother of 3."

Renée Marais NCRDC1780 Independent Debt Counsellor advises:

Debt review if applied correctly is a good system for repayment of debt. When you arrange for a consultation with a registered debt counsellor (http://www.ncr.org.za/register_of_registrants/registered_dc.php) you fill in an application form. On the form, your monthly income (gross income) before statutory deductions (PAYE, UIF, medical, pension etc.) is required as well as what it is after statutory deductions (net income), minus your essential living expenses (housing, services, utilities, school fees, transport etc.) to reach your distributable income. That is what is left after everything except your debt was paid. 

This available amount in terms of the National Credit Act must be distributed fairly to the creditors who are part of your debt portfolio (list of debt). The Act also requires you to provide the debt counsellor with a complete list of your debt which must be the Total Balances Outstanding including arrears (if applicable).  The debt counsellor then determines your state of over indebtedness and will advise you accordingly. 

While you are visiting the debt counsellor you can also ask for a reckless investigation. Reckless investigation can be referred to the National Credit Regulator if you feel that one or more of the credit provided might have been reckless. 

READ: How to keep your credit score healthy

The way reckless credit works is if you apply for credit, the credit provider has a responsibility to check what your affordability status is and your record for paying off your debt.  

The credit provider must also look at your gross income, net income and disposable income. If a credit provider fails to do this, the credit is reckless. If the credit provider did do the affordability assessment but the amount advanced causes you to be over indebted (meaning that you cannot really afford to pay the installment because you won’t have money for food for an example) that is also reckless. 

Check out our budget calculator to better manage your finances.

The way reckless credit is dealt with by the NCR, the National Consumer Tribunal and/or the Court is different. For the purposes of this answer, the debt counsellor on your request can assist with this.

When all the above has been done and you still cannot afford to pay your creditors it means that you are insolvent. How insolvency works can be better explained by a lawyer.  However if you do not have any money left for distribution or very little and a creditor summons you to court, the Magistrate hearing the matter may look at an affordability assessment done by a DC and a possible rearrangement plan and grant the order. This will however not be normal debt review.  

If the debt counsellor advised you that you don’t have enough money to repay your debt, please consult another debt counsellor for another opinion. The National Credit Act makes provision for various different ways of dealing with debt. 

About your budget, a good debt counsellor will be able to assist you in reorganising your budget for essential living expenses and you could ask for him/her to assist you.

If you already have a court order granted and you are unable to pay the amount determined, please make an appointment with your debt counsellor to reassess the situation and make recommendations to you and the credit providers. 

You can always do this yourself also. If you are making debt payments via a Payment Distribution Agent, you are paying for their services as they are entitled to. The National Credit Act does not require you to make use of a PDA. You can save some of the money utilized by the PDA (DC Partner or Debt Wize and/or  NPDA) but the drawback is that you will have to pay your creditors yourself and that the DC has no oversight into the matter. It is however an option that you need to be aware of.

When speaking to a Debt Counsellor make sure the person you are speaking to is indeed a registered debt counsellor by asking to see their registration certificate. Staff working for a debt counsellor may not assist consumers in debt review matters if they are not duly registered with the NCR. On the link above you can search to make sure that the person speaking to you is indeed registered. 

Again this is serious as you would not have the receptionist at the dentist do your root canal, the nurse at the hospital remove your appendix or the petrol attendant service your car.  

Please ensure that you speak to the duly registered debt counsellor about all your concerns. It is always a good idea to ask for a second opinion as it is your hard earned cash at stake. 

*Do you have a pressing financial question? Post it on our Money Clinic section and we will get an expert to answer your query.

Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers. 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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