Debt Counselling - Better described as Debt Review
The stress of repaying creditors can become overwhelming, but it need not be!
The National Credit Act makes provision for the process of Debt Counselling/Debt Restructuring or more the descriptive Debt Review, which was implemented to protect consumers like you against high debt repayments in tough economic times, as experienced at present.
The process of Debt Review starts by an evaluation of your current financial state to establish if you are over-indebted.
Coincidently, the evaluation is based on the same process that was used by the Credit Providers to establish whether you qualified for credit facilities, the same credit facilities that you are currently unable to service.
If your total monthly expenses combined with your debt obligations exceed your monthly income, you are considered to be over-indebted and will not qualify for any further credit facilities.
When evaluating your financial state, your registered Debt Counsellor will take your income, expenses and total debt obligations into consideration and negotiate a new repayment structure with your Creditors so that you are able to cover your monthly living expenses and pay your current credit facilities/accounts.
For example, if you earn a Nett-income of R7000 a month and have four accounts which you must repay i.e. Credit Card R1250 + Store account R310 + Credit Card R 950 + Personal Loan R 800 it would mean that you spend R 3310 per month on debt repayments of your R7000 income. This is even before you have covered your basic expenses like travel, food, electricity, etc.
We further must establish what your basic monthly living expenses are in order to allocate an amount for debt repayments.
Groceries for the household (toiletries, washing soap, etc.): R800
Food (meat, cereal, spices, bread, vegetables, fruit, etc.): R1500
Telephone account (cell phone, Telkom, etc.): R 300
Policies (funeral, retirement, etc.): R 180
Insurance (motor, household, life, etc.): R 380
School fees: R 900
Travel (petrol, bus fare, taxi fare, etc.): R 700
Medical (medicine, hospital plan, etc.): R 400
Your basic living expenses as per the above example, would then amount to R 5160, whereas your debt repayments are R3310 and you only earn R7000. You are definitely over – indebted and would find it impossible to repay all your debt in a timely manner and maintain a decent living standard.
Cutting back any further on your basic living expenses can have a negative impact on your health and basic human rights.
This is where we come in; we calculate what your total debt is and start negotiating with your creditors for a lower monthly instalment based on the amount of money left after servicing your basic living expenses.
This now leaves you repaying all your debt and maintaining a good standard of living with less stress and some extra cash for those unforeseen circumstances.