March 24, 2017

Debt Review

Increasing costs of living and tough economic conditions have caused many people to run into financial difficulties through no fault of their own. Interest rates on some kinds of outstanding loans can be raised with little advanced warning, leading to difficulty making higher monthly minimum payments. One frequent source of help is a debt counseling service, which is also known as a debt review. Depending on the severity of each borrower’s financial situation, he or she can benefit substantially from following a financial plan set forth from a debt review.


What is Involved in Debt Review?

At an initial consult with a debt review specialist, clients are normally required to bring copies of their most recent financial records documenting income, expenses and total balances owed to creditors. A debt counselor will then use this data to help them formulate a manageable budget that allows for monthly repayments on an adjusted or consolidated balance owed. Some debt reviews may also require that each client obtain and bring in a copy of his or her credit report, though some debt counselors will access client credit reports themselves during this consultation.


During a meeting with a debt review counselor, clients are encouraged to disclose all relevant information about each outstanding balance, each interest rate on different accounts and whether any balances have been sold to third-party collection agencies. The more complete the information debt review specialists have, the better the recommendations they will be able to make for each individual client.


Eligibility for Debt Review

Criteria for debt review eligibility are rather broad and make allowances for many different financial situations. In the vast majority of cases, anyone who is in debt after paying basic monthly living expenses qualifies for one form of debt review and a debt repayment adjustment plan. A qualified debt review counselor is frequently able to negotiate with all types of creditors to get each client’s payments and interest rates reduced to more manageable levels. Borrowers may also be able to obtain a repayment period adjusted to a longer time frame with smaller monthly payments.


When to Seek Debt Review

Sooner is always better than later when it comes to seeking this kind of debt relief assistance. Allowing unpaid bills to pile up and late fees to accumulate will only worsen an individual’s credit rating and possibility result in fewer options for a repayment plan. When this financial situation is addressed at the first signs of problems, each debt review client has better chances at a clean credit record in the future after all adjusted payments are rendered. Individuals who qualify for debt review protection normally receive immunity from creditor legal action as long as they are making good faith efforts to repay their outstanding debts.


The Debt Review Process

According to South Africa’s National Credit Act of 1995, consumers can start the debt review process by filling out a document called a Form 16 and submitting it to a debt review counselor. The counselor is then required by law to inform all of the individual’s creditors that the debt review process is under way, preventing any further legal action against the person seeking debt relief. After the creditors receive this Form 17.2, each of them issues a certificate of balance back to the debt counselor for review of each amount the client owes.


Once this initial paperwork has been processed, a debt counselor can then work with a client to plan an achievable repayment schedule. The debt relief specialist can then negotiate these adjusted repayment terms on the client’s behalf to each creditor. After all creditors and the individual client have reached an agreement on interest rates, adjusted monthly payments and time frames for repayment, the debt counselor can submit the offers to the Court of Affidavit for the proposed terms to be rendered legally binding.


This debt review process allows both client and creditors to accept or reject initial proposed terms of repayment. Negotiation and adjustments are permitted until both parties reach an agreement both considers fair and beneficial. The primary role of the debt counselor is to act as an intermediary and to submit completed proposals to the court system to seal the repayment plan obligations.


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