Cancelling Debt Counselling or Debt Review

In our line of business, we receive plenty of questions about how consumers can go about cancelling debt counselling or debt review.

The answer depends on if a debt counselling/ restructuring court order is in place. For this reason, we will go into detail on all the various processes involved in the cancellation of debt counselling. The various stages which will be explained are listed below:

 Before a consumer is declared over-indebted.

• After a debt counsellor has declared a consumer over-indebted, however, has not gone to court to obtain a court order.
• After a debt counsellor has declared a consumer over-indebted and a restructuring court order is in place.
• After a debt counsellor has declared a consumer over-indebted and settled all restructured debt.

Cancelling Debt Review/ debt counselling: The Why, How and the Consequences: (Before a consumer is declared over-indebted)

Why?

It is essential to realize that debt counselling/ restructuring is a regulated process to assist over-indebted consumers manage their debt. This process combines a consumers' available net income with concessions from creditors. An affordable monthly payment with these creditor concessions gets calculated to eliminate debt in the shortest possible time.

This process is a voluntary process where a consumer approaches a debt counsellor for debt help. The debt counsellor will then notify creditors of their clients’ application for restructuring. The consumers' creditors will issue a certificate of balance. The debt restructuring process is now underway.

The debt counsellor will inform the credit bureaus of the consumers’ application for debt counselling. The consumers’ credit report will now have a debt counselling/ restructuring indicator. At this stage, the consumer may opt to cancel the process if their financial circumstances have changed. For example, they may receive a surprising inflow of unexpected cash through an inheritance. They may even get a better job position with a salary increase and feel comfortable repaying their debt.

The debt counsellor will discuss the consequences should a consumer wish to cancel. The consumer will need to verify in writing that they would like to withdraw from the process. During these initial stages, it is not difficult to cancel and to remove the indicator from the consumers’ credit bureau profile.

How?

The consumer will notify their debt counsellor in writing of their intention to cancel. Their Debt counsellor will then inform the following parties:

• National Credit regulator
• TransUnion Credit bureau
• Experian Credit bureau
• Compuscan Credit bureau
• XDS Credit Bureau
• All other smaller credit bureaus
• All the consumers’ creditors

The credit bureaus will remove the credit bureau indicator on receipt of the notification from the debt counsellor.

The removal process takes around five business days.

The consequences of cancelling the debt counselling process prematurely during the initial stages:

The problem with cancelling or withdrawing at this stage is that the clients’ creditors can immediately act against them. Repossessions will continue unless the client is able to settle any arrear amounts. The decision to withdraw from the process needs careful planning and consideration. In certain instances, a salary increase may not be enough to avoid repossessions outside the debt review process.

Cancel Debt Review or debt counselling – The How and the Consequences. (After your debt counsellor has declared you over-indebted but has not gone to court):

How?

Before the amended NCA Regulations in 2015 came into effect, if a consumer wanted to cancel their debt review process, they would contact their Debt Counsellor and request cancellation. The debt counsellor would issue a voluntary withdrawal notification. The debt counsellor will issue the notice (Form 17.4) to:

• The National Credit Regulator
• All the credit providers
• All credit bureaus

On receipt of the notice, the consumer would be able to withdraw from the process without having any issues.

After 2015 the process of cancelling this process changed. Debt counsellors are now not allowed to issue form 17.4 anymore.  In order to cancel a consumer has to notify the debt counsellor before form17.2 accept were issued. Please be advised that as soon as a debt counsellor issues a (Form 17.2) the over-indebted consumer will be under debt review. The debt counsellor will then apply for a court order. Consumers can apply to a court to reverse their over-indebtedness status. A court will only consider this application if there is no restructuring court order in place.

NB: If your financial position has changed, you will need to approach a court before the court order gets granted.

The courts will look at the following aspects to determine if the consumer is no longer over-indebted:

1. If all arrears' amounts are up to date.
2. The consumers’ current financial position.
3. The consumer needs to prove and provide the relevant supporting documents.

The real consequences if a consumer cancels Debt Review during this stage:

The consumer will still have debt even if they get the court to declare they are no longer over-indebted. After cancellation, all concessions from credit providers may fall away.

These concessions and reduced interest rates can be a very efficient tool in reducing debt.

The following will happen after a consumer cancels debt review:

• The original contractual interest rates will become applicable again.
• Waived delinquent payment penalties may get levied against current accounts.
• Credit providers may start legal action as the consumer will no longer have protection. This applies especially to consumers who cancelled the process before (Notice Form 17.2) is issued.

Cancelling of Debt Counselling / Debt Review after a court granted a court order:

In a recent court ruling (Janse van Vuuren Judgment) the court found that a court can no longer rescind a debt review court order. The Court judgment means that all debts except home loan finance need to get settled before a consumer can cancel the restructuring process. The full judgment can be downloaded by following this link: Resources (Legal)

Facts to consider before cancelling Debt counselling / Debt Review:

As shown above, it is possible to cancel the process of debt counselling, however, the consumers’ debt does not disappear or fall away.

If a consumer decides to cancel before form 17.2 was issued, they will still need a comprehensive plan of action to deal with all current debt.

The restructuring process, in some instances, takes between 2 to 4 years to complete, nevertheless, this restriction is a far better solution than sequestration. Restructuring is also a far cheaper option than debt consolidation.

Additional points to consider before cancelling debt review:

In conclusion:

Debt counselling can be cancelled if the following conditions exist –

• All restructured debts are repaid fully. You may opt to exclude your mortgage agreement provided the bond is up to date. What is a Credit Clearance Certificate 2020?
• Provide all paid up letters to your debt counsellor for them to issue a clearance certificate. The clearance certificate will remove the restructuring indicator.
• You may cancel at any time before the debt counsellor issues “Form 17.2” accept.
• If you were declared not to be over-indebted (“Form 17.2” rejection) the process will get cancelled. Section (86)7(a) of the National Credit Act 34 of 2005.

If there is no Restructuring Court Order a consumer may opt to approach a court to be declared as no longer being over-indebted. The court will need the following documentation:

• Application form you made to the debt counsellor (“Form 16”) - Debt Counselling: A Simple Guide for 2019
• “Form 17.1” – notification to credit providers that you have applied for debt review
• “Form 17.2” – accepted notification to credit providers that the consumer's application was successful
• “Form17.2” rejection – notification to credit providers that consumers’ application was unsuccessful
• Withdrawal notices from your debt counsellor (“Form 17.W”)

If a court order is in place, then all restructured debts need to be settled before a consumer can withdraw.

Cancelling this process can have serious negative consequences. Ensure you speak to us before making any final decisions.

There are other processes available to deal with debt which include

• Debt consolidation
• Sequestration
• Administration

Having an impaired credit history, you will find it hard to get a debt consolidation loan. The processes of Sequestration and Administration will cause damage to your already struggling credit score. Make sure you contact us (Credit Salvage), the NCR or conduct intense research into all the positives and negatives before you cancel debt review. 

Sources:

• Debt Review Removal Case Law
• Credit Salvage PAIA Manual
• Credit Salvage PAIA Form 2
• Credit Salvage PAIA Form 4