You can withdraw from debt review if your financial situation has changed significantly or you only have your mortgage left to pay.
Earlier this year new guidelines were issued as part of the National Credit Amendment Act (NCAA) around when a person may exit debt review.
Previously you could exit debt review only once you had paid all your re-arranged debts in full and had received a clearance certificate. This also included your home loan, if it had formed part of the debt review application.
A significant change is that you can now exit debt review even if your mortgage is not fully settled, although you would have to demonstrate that you have the financial ability to meet those future mortgage repayments – or any other long-term agreement. There must also be no outstanding payments on the mortgage and all your other outstanding debt must have been settled. This includes vehicle finance, which is not considered a long-term credit agreement and if it forms part of the debt counselling re-arrangement order, it has to be paid up in full before a clearance certificate is issued.
You can also apply to exit debt review if you have had a significant change in your income. If your financial situation has improved to the extent that you are able to meet your financial obligations as they were prior to debt review, and if you have not fallen behind on your debt review payments, you can apply to the courts to consider your withdrawal from debt review.
How to withdraw
It’s important to note that a debt counsellor does not have statutory powers to terminate or withdraw the debt review process. The consumer has to go to court to obtain this permission.
You would have to approach the court to rescind the order or to apply for an order which declares that you are no longer over-indebted. Once the order has been issued, you must receive a clearance certificate from the debt counsellor within seven days. Upon receipt of the order, a debt counsellor will notify the credit providers of the withdrawal by means of Form 17W.
Making direct payments to creditors
Some consumers who are considering debt review are concerned about how to ensure that the payments they make are correctly paid to the creditors. The good news is that in terms of the NCAA, a consumer has the right to make direct payments to credit providers and not make use of the services of a Payment Distribution Agent (PDA). According to the National Credit Regulator, if a consumer chooses to make direct payments to credit providers, this cannot be construed as non co-operation and should not be used as a reason for suspension of debt counselling services.
When you apply for debt review, you would need to sign Form 16 in order to apply for direct payment.
- You remain responsible to make all payments as re-arranged, in full and on time.
- You would have to provide proof-of-payment to the debt counsellor on a monthly basis for record keeping and to enable provision of aftercare service, as a consumer cannot be under debt review without a debt counsellor.
- If you miss a payment or pay late, you will still risk termination of the debt review by the credit providers
- Debt counselling fees are payable to a debt counsellor for services rendered and this includes payment of aftercare fees.
- For a debt counsellor to issue a clearance certificate, all after care fees must be up to date. Where the debt counsellor has suspended provision of service, a consumer must provide proof of settlement letters from credit providers for a debt counsellor to issue a clearance certificate.