Selecting Debt Counselling to help you out the debt trap

When you select a debt counsellor it is an important step in charting your way to financial freedom but consumers are advised only to consider this option if there is a real intention to repay the debt.

With more than 1733 debt counsellors registered with the National Credit Regulator (NCR), indebted consumers often find it difficult to determine which are reputable players that will be able to assist in the quest to restructure your debt.

“It’s important to choose a debt counsellor who abides by a strict code of ethics, complies with the provisions in the National Credit Act (NCA) and that delivers the services you are paying for,” says Octogen director and debt counsellor, Paul Slot.

The NCR’s Debt Review Task Team recently released a report which showed that some debt counsellors were failing to comply with the NCA and were promoting the debt review process for the wrong reasons and that some clients are entering the process without the aim of ever paying for the service or repaying the debt.

“Understanding your rights and responsibilities during the debt counselling process is therefore crucial as part of the process to help you get back on your feet financially,” says Slot.

As a first step, consumers should recognise that they are in financial trouble and seek advice and help. “Being caught in a debt trap can be a scary experience and it can be difficult to find someone to talk to,” he says. In addition, many of the legal processes involved in the debt review process can be complex, so you’ll need to find someone you can trust to guide you through it.”

Consumers should remember that, should they choose to go for debt counselling, the law provides that they have the right to be protected in the debt review process on condition that they keep their side of the restructuring arrangement. This information should be conveyed to the consumer in plain and simple language and that their information is treated confidentially.

“The aim of debt counselling is to assist clients to repay their debt and when consumers default while they are in the process they make it virtually impossible for the debt counsellor to protect the consumer” cautions Slot. “A debt counsellor is obliged to develop realistic and detailed debt restructuring proposals to assist you to meet your financial obligations.”

One of the most important functions of a debt counsellor is to negotiate with credit providers to restructure your debt repayments. In order to do this, the counsellor needs to do an accurate assessment of your financial position. “Being honest about what you can and cannot afford is in your best interest,” adds Slot. “There’s little point in saying you can pay back most of your debt, for example, if you have no money to buy food with.” For the debt restructuring to be successful two things are important; a realistic budget for the consumer and a restructuring proposal that makes sense. The absence of one of the two may well result in an unsuccessful debt review process.

Slot believes debt counsellors should use technology available, such as specialised debt review computer programmes, to help indebted consumers accurately assess their financial situation. “It’s also important that your counsellor has good relationships with credit providers such as banks, so ask about this upfront,” he says.

Debt counsellors have already helped hundreds of thousands of indebted South Africans through the debt review process to find financial freedom. “Debt Counselling is an ideal way to restructure your debt. It is a process to clear your name. This process is complex and this requires specialist intervention and dedication from the consumer and the debt counsellor” says Slot. “If you wish to clear your name in order to access credit later on, you’ll need to pay the debt off first.”

Before signing any agreement with your debt counsellor, you should ask what fees you will be charged. He adds: “Always get a copy of the agreement.”