The National Credit Act, Act 34 of 2005 afford every over indebted person the right to apply for Debt Review.
A person is over indebted when his/her monthly debt obligations exceed his/her monthly income after all necessary living expenses has been deducted. The over indebted individual may approach a debt counsellor for assistance. The debt counsellor will do a proper assessment of the individual's state of indebtedness and if it is determined that the consumer is indeed over indebted, the debt counsellor will recommend formal debt review as an option. The advantage of formal debt review is that there are no limit as to your debt amount and you are normally not required to sell your assets. Your debt counsellor will negotiate with your creditors for lower monthly installments that will allow you to retain your assets whilst still servicing your debt.
If you are struggling to pay off your debt, your debts are R50,000 or less – and you have no assets that can be sold to pay back the debt – then Section 74 of the Magistrate’s Court Act allows you to apply to the court for an administration order. This order will temporarily protect you from your creditors and enforces a repayment plan that enables you to repay your debts while still keeping some money for your basic living costs. The costs are: Administrator’s fees – to apply for the administration order (you only pay this once); Administrator’s fees – to assist you to pay your creditors (you pay this every month, and the amount is capped at 12,5 % of the amount collected); Employer’s fee (5%) – if your employer has to deduct money for creditors from your salary before you get paid (these deductions are called emolument attachment orders); and Interest on the debts that you owe to creditors.
Debt management are for those consumers who, although they are not over indebted, they do experience financial difficulties either due to the fact that they do not know how to manage their finances or simply because the date on which they get paid was changed, they are unable to make payments on time. We will help you with a budget and will negotiate with your creditors to find a workable solution - one aimed at improving your credit record.
Debt consolidation entails taking out one loan to pay off many smaller loans. This is often done to secure a lower interest rate or to secure a fixed interest rate.
Having many small accounts normally means that interest and service fees must be paid on each one of those accounts. Consolidation brings the convenience of servicing only one loan. It also means the elimination of monthly interest and service fees on those smaller accounts and ultimately translate into savings for the consumers.
The effect may be that the consumer will have more disposable income available as the interest and monthly service charges are lower. The debt could then be settled sooner.
A consumer who applies for a consolidation loan must be credit worthy and must qualify for the loan by passing the credit provider's credit vetting process.
An insolvent consumer, (that is a person who cannot pay his/her debts because they exceed the value of his/her assets) may apply for a sequestration order. The insolvent must place all his assets in the hands of a trustee, who must sell the assets and distribute the cash among the creditors. The creditors or the consumer may apply for the order. A voluntary sequestration is when a debtor voluntarily surrenders his/her estate by applying for a sequestration order. For voluntary sequestrations to succeed the consumer must show that his/her estate is insolvent; he/she owns sufficient realizable property to meet all the costs of sequestration and that sequestration will be to the advantage of his/her creditors as a whole. Compulsory sequestrations These are applications brought by creditors where the consumer is given the opportunity to show cause why his/her estate should not be sequestrated. The applicant must show, however, that sequestration will be to the advantage of the creditors as a whole and that either the consumer has committed an act of insolvency or are, in fact, insolvent.