Navigating The Debt Counselling Process – And How To Spot ‘Dodgy’ Debt Counsellors

Managing your finances can be challenging, especially when debt begins to pile up. For many, the weight of financial pressure can leave them uncertain about where to turn for help. While debt counselling is a valuable resource designed to guide individuals through these tough times, providing expert advice and actionable strategies to help them manage and reduce debt, it is necessary to fully understand the process and work closely with reliable professionals to ensure effective guidance and compliance with the National Credit Act.

 

What is debt counselling?

Debt Counselling is a formal legal process that allows an individual to be officially declared over-indebted. Individuals are considered ‘over-indebted’ when they are unable to meet their financial obligations under all credit agreements on time. Through this process, a debt counsellor negotiates a restructured payment plan with creditors and obtains a court order to formalise the new arrangement. If you are burdened by excessive debt, a debt counsellor can advocate on your behalf to secure lower interest rates and reduced monthly instalments, making your debt more manageable and providing a clear path to financial recovery.

 

The pros and cons of debt counselling

Before turning to this remedy, it’s important to carefully consider both the advantages and disadvantages associated with this process.

 

Some of the key benefits include the following:

While undergoing debt counselling, creditors are prohibited from taking legal action against you and there is no permanent record of undergoing debt counselling. This ensures that your financial challenges do not impact your future opportunities. One of the main benefits is the consolidation of multiple debts into a single monthly repayment, making it easier to manage. Your debt counsellor will help structure a budget that prioritises essential needs, ensuring that debt repayments are based on what you can reasonably afford. They will also provide valuable guidance on ways to cut costs and save money, helping you regain control of your financial situation. Debt counselling eliminates the stress of constant creditor calls demanding payment, reducing the anxiety often linked to overwhelming debt. Ultimately, debt counselling helps restore financial stability.

 

Some of the disadvantages include the following:

One of the main drawbacks is that you are prohibited from taking on additional credit while undergoing the debt counselling process. This limits your financial flexibility. Additionally, debt counsellors charge fees for their services, which could add to your financial burden, especially if you are already struggling with debt. Additionally, because debt counselling often involves smaller monthly payments to creditors, it may take longer to pay off your debts, delaying your path to financial freedom.

 

The role of the debt counsellor and the debt counselling process

• Initial consultation – Contact a registered debt counsellor who will evaluate your financial situation, including your income, debts, and expenses, to determine whether debt review is the right option for you. Ensure you bring along your payslips, bank statements, credit agreements and other relevant documents to assist the counsellor in accurately assessing your financial situation.
• Application and assessment – You will be declared ‘over-indebted’ if your expenses significantly exceed your income. If debt review is deemed the right course of action, you will need to complete Form 16 to formally apply for debt review with the National Credit Regulator.
• Creditor notification and negotiation – The counsellor will notify your creditors about your debt review application, which temporarily suspends any legal actions, including repossessions. They will then negotiate with your creditors to reduce interest rates and create a single, more manageable repayment plan that consolidates your debts.
• Court order and payment distribution – After you and your creditors reach an agreement on the repayment plan, it is submitted to the court for approval. The court order formally establishes the debt review process. You will then make one monthly payment to the Payment Distribution Agent, a neutral third party who will distribute the funds to your creditors according to the court-approved plan.
• Repayment and completion – Once you’ve fully repaid all your debts in accordance with the plan, you will receive a clearance certificate, marking the successful completion of your debt review.

 

How to spot ‘dodgy’ debt counsellors

In terms of the National Credit Act, the debt counsellor must be registered with the National Credit Regulator and have an NCRDC number. You can verify the debt counsellor’s registration by visiting the NCR’s website. To complete this process, you will need the counsellor’s registration number, which should be clearly displayed and made available to you upon request. Alternatively, you can contact the National Credit Regulator’s call centre at 086 062 7627 to verify the debt counsellor’s registration details. Please note that the registration status of debt counsellors may change, so it is important to confirm the most up-to-date information. Be vigilant for red flags. The NCA has established strict guidelines that all debt counsellors must adhere to. If a debt counsellor is unwilling to provide their registration details or if you encounter discrepancies in the information, it may indicate a potential issue.

 

Take control of your financial situation today

Empower yourself with the knowledge to make informed decisions about your financial future in 2025. For further information or any questions, do not hesitate to reach out to Hammond Pole Attorneys for expert guidance and support.

 

Blog by: Carla de Waal
Carla de Waal: CarlaDW@hammondpole.co.za