08 Apr Debt Review Removal Before Completing Repayments

Being under debt review can have a shocking effect on your credit record and financial health. The flag indicates that you are financially irresponsible and incapable of handling credit facilities well. Most people find that debt review makes their credit score plummet, too. That’s because credit scores are calculated using an algorithm that considers credit history. A derogatory mark like debt review will dramatically lower your score, discouraging lenders from granting you credit to protect both you and them from your default.

In addition, the debt review flag could make renting property difficult, as landlords may interpret the flag as an indicator that you won’t pay rent. If you apply for jobs in finance, you’ll likely be rejected, as a debt review flag demonstrates that you shouldn’t be responsible for money.

If you know that you no longer need debt review because you can make repayments as originally agreed or you’re in a better financial position, is it possible to exit before completing repayments?

This post explores how you might exit debt review before completing repayments and how Cape Town Legal Consultants can help.

When Can You Exit Debt Review Before Completing Repayments?

The route to exit debt review is regulated by section 71 of the National Credit Act (NCA). The NCA and Amendment 19 of 2014 state, “A consumer whose debts have been re-arranged in terms of Part D of this Chapter, [may apply to a debt counsellor at any time for a clearance certificate relating to that debt re-arrangement] must be issued with a clearance certificate by a debt counsellor within seven days after the consumer has— (a) satisfied all the obligations under every credit agreement that was subject to [the debt re-arrangement]” (section 71).

Luckily, the NCA also provides that the NCR is to provide further guidance on debt review and exiting it – which it does.

The NCR’s guidelines say, “A consumer who is not yet the subject of a Magistrates’ Court debt re-arrangement order in terms of section 87 of the NCA, may together with the proposal of the debt counsellor present the additional facts to the court to bring about a rejection of the proposal. If the proposal is rejected by the Magistrate, every credit provider and every credit bureau should be notified of the relevant order. This means that in cases where debt re-arrangement order has not yet been granted, the debt counsellor and consumer must place the new facts in front of the Magistrate who can then declare the consumer not over-indebted.”

The NCR also states that debt review can be rescinded if a debt counsellor incorrectly filed an application.

Conditions You Can Exit Debt Review Under

Now that we have a clear understanding of what the law and regulatory body guidelines say about exiting debt review, let’s discuss the circumstances you can exit debt review.

After Being Declared Over-Indebted by the Magistrate’s Court

You can only exit debt review after being declared over-indebted by the Magistrate’s Court if your application was incorrectly filed or you’re sequestrated.

Your Application Was Incorrectly Filed

The power to rescind Magistrate’s Court orders is limited to specific circumstances, primarily related to incorrect filing. If you can prove your debt counsellor incorrectly filed your application, you can apply for a hearing at the Magistrate’s Court to have the application rescinded. You can read more about this in regulation 24(1)(b) of the NCR’s guidelines for debt review withdrawal.

You’re Sequestrated

Being sequestrated means that you’re declared bankrupt – voluntarily or involuntarily – which will allow your creditors to seize and auction your assets, so long as the money covers at least 20% of what you owe. So, for every R1 you owe your creditors, the auctioned assets must cover 20 cents. Note that this option is very undesirable and stays on your credit record for as long as 10 years.

Before Being Declared Over-Indebted by the Magistrate’s Court

If the Magistrate’s Court hasn’t declared you over-indebted yet, you or your debt counsellor can present additional facts to the court evidencing that you’re not over-indebted, your financial circumstances have changed, or that your agreements have been satisfied. If the Magistrate’s Court finds that you’re not over-indebted, your debt counsellor’s original recommendation of over-indebtedness will be rejected.

Let Cape Town Legal Consultants Help You Remove Debt Review Before Completing Repayments

Cape Town Legal Consultants’ team of debt review removal experts can help you remove debt review. Whether you want to prove that your application was incorrectly filed or that you’re not over-indebted, our team can guide you through the intricacies of debt review removal with ease. Let us help you take control – contact us today.