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How Does Debt Review Removal Work?

How Does Debt Review Removal Work?

Are you wondering how to exit the debt review process? You’re not alone! According to recent data from Veri Cred Credit Bureau (VCCB), approximately 717,495 people were under debt review at the end of Q2, 2021.

If you’re part of the statistics, you may want to know more about debt review removal.

Debt review removal is a legal process. You can submit a court application for debt review cancellation if there’s no court order or if you have a complaint. If you don’t qualify for cancellation, the only way is to pay your debts and get a clearance certificate from your counsellor. 

Introduction to Debt Review

Before we can explain how debt review removal works, it’s best to understand what debt review means. The debt review process begins when you have become over-indebted. That means you have too much debt that you’re struggling to pay off.

Your debt counsellor will then notify your creditors and negotiate a new payment plan for you. The application for debt review involves the courts, and the process begins when the court order is granted.

After that, the only way to stop being a debt review client is to complete the process or approach the court to cancel the court order.

Debt Review Removal Step-By-Step Process

There are two different situations when it comes to debt review removal. The process depends on whether a Magistrate issues a court order.

Let’s look at the two situations in more detail.

Debt Review Removal Without a Court Order

A debt counsellor is a professional who helps you apply for debt review. They’ll negotiate with creditors for lower monthly instalments and a longer repayment period.

They’ll also notify relevant credit bureaus of your application for debt review. The counsellor does this by sending Form 17.1 via the NCR Debt Help System.

The debt counsellor will also submit a proposal to the Magistrate Court to get a court order. Once the court order is issued, you’re officially a debt review client. But you can cancel the debt review process before this court order is issued. Here’s how you go about it.

Step 1: Present Extra Facts to the Court

You can choose to withdraw from debt review before your counsellor issues Form 17.2. This is the easiest way because you don’t have to approach the courts. Once you do this your counselor will update your status to A1. This means voluntary withdrawal by the consumer prior to being declared over-indebted.

After your counsellor issues Form 17.2, you can no longer have the choice to withdraw on your own terms. But you can still approach the courts before a court order is made. The goal is to convince the Magistrate to declare you’re not over-indebted. This is usually the case if your financial situation has changed. For instance, you might have a new job that pays more. That means you can afford the original repayment plan.

The debt counsellor has to submit a new proposal that supports the change in your circumstances. You have to prove that you’re, in fact, capable of making payments according to your original loan contracts.

Step 2: Get a Court Order to End the Debt Review

If the Magistrate declares you’re not over-indebted, they’ll reject the application. Remember, once Form 17.2 has been issued, you can no longer voluntarily withdraw from debt review. The court has to declare you not over-indebted. Otherwise, the debt review process will continue.

Step 3: The Debt Counselor Notifies the Relevant Parties

When the court rejects your initial debt review application, your debt counsellor has to update the Debt Help System (DHS) to Status G1. Status G1 means the court rejected your application for debt review

You must then pay the debt counsellor fees for their services. Also, you must pay your creditors according to the original credit agreement or contract.

Debt Review With a Court Order

Please note that once there’s a debt re-arrangement order, approaching the court won’t help. Not even a High Court can make the order to release you from debt review. The only way to exit debt review is to repay all debt (except home loans or other long-term credit agreements). After that, you can apply for a clearance certificate.

If you have a court order in place for debt review, here’s how the debt review removal process works.

Step 1: Talk to Your Debt Counsellor

You need a debt counsellor when you’re under debt review. This person will guide you through the debt review process successfully. Once you’re ready for debt review removal, you must supply your counsellor with the right documents. These documents should show that you have paid the full outstanding amount. The required documents include paid up letters from creditors, your payslip, and your ID.

Step 2: Get a Clearance Certificate

Your debt counsellor will assess your financial situation before issuing a clearance certificate. This can only happen if you have met all the requirements of section 71. Your counsellor will also send legal notification to your creditors and submit relevant documents to the NCR.

Step 3: Status Update

Once you get a clearance certificate, you’re no longer over-indebted, and the debt review ends. The clearance certificate is issued by the debt counsellor, not the court. The debt counsellor must then submit relevant documents to the NCR. 

The NCR will verify these documents before updating the NCR Debt Help System. Your debt review status is then updated to Status F1 or F2. After that, the debt review flag disappears from your credit profile.

Status F1 means you have settled all restructured debts except the mortgage agreement.

Status F2 means you have settled all restructured debts.

Please note: The NCR recently released a Circular in February 2022. It states that debt counsellors can no longer update the NCR Debt Help System (DHS) to end the debt review process for clients. This changed because some debt counsellors were updating debt review statuses incorrectly.

What Does the National Credit Act Say?

Applying for debt review is a personal and voluntary decision. However, once your counsellor issues Form 17.2, you can only withdraw according to the terms of section 71, read with section 88(1)(c) of the National Credit Act (NCA). Here are the main highlights to keep in mind:

  • You can withdraw from debt review anytime before your debt counsellor issues Form 17.2.
  • If your debt counsellor says they have issued Form 17.2, you can make a court application to be declared NOT over-indebted.
  • However, if the Magistrate declares you over-indebted, you have to complete debt review. That means settling all your debts according to the court’s debt agreement order.
  • Once you’re declared over-indebted, your debt counsellor, the High Court, or any court does not have the power to withdraw you from debt review. The only exit is to repay all debts and apply for a clearance certificate according to the regulations set by the NCA.
  • You can still get a clearance certificate if you have a mortgage or long-term debt agreement. But your short-term credit debts should be paid up. In addition, the mortgage should have no outstanding payments.

What If I Did Not Apply for Debt Review?

A debt counsellor can only apply for debt review on your behalf at your request and with your permission. Debt removal is a process you choose to start on your own. You’re not forced into it. But once the court order kicks in, you have no choice but to complete the process.

You can only withdraw if you didn’t apply for debt review or if your debt counsellor did not follow the due process outlined by the NCA. In that case, you can file a complaint with the NCR.

The NCR commits to resolving all complaints within 90 days. The debt counsellor will have to provide papers, such as Form 16, signed by you. They’ll also submit other specified documents to prove that you applied for debt review on a specific date.

If they fail to do this, the NCR can decide that you did not apply for debt review. The NCR will update your debt review status to Status B. This means that the assessment has resulted in a rejection of the debt review application.

Can the National Consumer Tribunal Grant Debt Review Removal?

Debt review can be subject to a Magistrates court order or a consent order by the National Consumer Tribunal (NCT). That means your debt counsellor can seek a debt review court order or a consent order from the NCT in terms of section 138.

A Tribunal consent order is almost the same thing as a Magistrate court order. So, you can only apply for debt review removal if you have paid up letters from creditors.

In the event of a consent order, then the correct organisation to approach is the NCT. Your debt counsellor will know what to do. The important thing is to work with a qualified counsellor registered with the NCR.

debt review removal process randwallet
debt review removal infographic

How Long Does It Take to Remove Debt Review Status?

Removal of debt review status after a court order can only happen if you settle all applicable debts. Once you have met the requirements of your court order, you must submit all the relevant documents.

After that, expect to receive a clearance certificate within seven working days. There are several status codes you must be aware of when it comes to debt review.

  • Status Code B – Assessment has resulted in a rejection (you don’t qualify for debt review).
  • Status Code F1 – You have settled all restructured debts except the mortgage (the debt review process is complete).
  • Status Code F2 – You have settled all restructured debts (the debt review process is complete).
  • Status Code G – Magistrate reversed the debt review court order. Or you opposed the debt review application and have been declared not over-indebted.
  • Status Code G1– Application for debt review rejected by the court. You’re not over-indebted.

For the above Status Codes – B, G, and G1 – the NCR will update your status in the DHS system. They do this within seven working days after your counsellor submits the specified documents.

After that, all credit bureaus will have three working days to remove your status as a debt review client. If there’s no response within this period, you must contact the NCR.

The request for debt review removal will be denied and closed if your counsellor does not submit all the required information and documents.

Your counsellor will have to submit a new request. If your debt counsellor submits false information, they’ll be investigated by the NCR for fraud.

Can I Remove Myself From Debt Review?

If you’re wondering how to get off debt review by yourself, the outcome depends on the situation. A qualified debt counsellor must assist with debt review from start to finish.

However, you can still file a court application for debt review cancellation. The court will clear the debt review order if your counsellor failed to follow the correct application process.

Some people also choose to stop cooperating with their debt counsellor. In that case, the counsellor will file Form 17.W (Withdrawal from debt review).

Your debt counsellor can also suspend his or her debt counselling services to you. If this happens, your debt review status will not change unless you pay all your debts and counselling fees.

If you ignore the debt re-arrangement order, you’ll have to pay your creditors directly according to the original credit agreements.

As a result, the National Credit Act no longer protects you. Your creditors have the right to take legal action against you. In addition, you’ll remain under debt review until you have paid up letters.

How Can I Get My Name Removed From Debt Review For Free?

As mentioned, you can’t be under debt review without a debt counsellor. Unfortunately, a debt counsellor will only offer their services if you pay their fees. That means that removal from debt review cannot be free of charge.

According to the NCR, you have to pay the fees your counsellor charges for work completed. You also have to pay applicable legal fees. However, your counsellor must charge reasonable fees with proof of work done.

If you have to approach the courts for debt cancellation, it may be necessary to hire a qualified attorney. That’s because application errors can delay the process or lead to unwanted outcomes.

Even though it’s possible to represent yourself in court, an attorney is more qualified to help you with the court application and termination of debt review. Your debt counsellor can’t assist you after a court order.

They can only provide a clearance certificate after the court application has taken effect. So, for best results, only work with an attorney specialising in debt review services. Today, it’s easy to find the right local attorney online.

For instance, if you’re in Durban, Google “debt review removal attorneys in Durban.” Similarly, if you’re in Bloemfontein, you can Google “debt review removal Bloemfontein” or “debt review companies in Bloemfontein.” For Johannesburg, go with “debt review removal Johannesburg” and so on.

Make sure you check online reviews to verify the company has a good reputation.

FAQs

How to clear my name from debt review?

You can only exit court-ordered debt review by paying your debts and getting a clearance certificate. Even if your financial situation has improved, you’ll still have to complete the debt review process according to the legislature in the NCA.

Can you leave the country if you are under debt review?

You can still travel and even live abroad while undergoing debt counselling. The important thing is to communicate with your counsellor and stick to your repayments.

How to check debt review status?

All credit bureaus must provide you with a free credit report once a year. You can check your status by getting a free credit report to see if the debt review flag is still displayed.

Can I check debt review status online?

Yes, you can request a credit report online, for example, by visiting the following sites:
Transunion
Experian

What happens after debt review removal?

What happens when you cancel debt review is up to you. You can choose to apply for new loans. Or, you can focus on improving your credit score and financial situation.

How to improve credit score after debt review?

– Work on repaying any outstanding long-term debts.
– Diversify your credit mix by applying for different types of loans
– Make sure you pay your debts on time.
– Be patient and give your credit score time to recover.

How long after debt review can I apply for credit?

You can apply for loans once you’re no longer under debt review. However, some South African lenders offer loans for debt review clients.

Sources: 

National Credit Regulator (NCR)NCR Debt Review Withdrawal Guidelines 2021

NCR Debt HelpRevised DHS Procedure

Southern African Legal Information Institute – Unintentionally Trapped By Debt Review

Our Research Expert

Gracie Makowe is a full-time personal finance writer with 10 years of experience and a Bachelor of Commerce in Financial Management from UNISA. Learn more.