Debt review is a formal process in South Africa designed to assist consumers who are struggling to meet their financial obligations. Governed by the National Credit Act (NCA), it provides a structured and legally protected route for consumers to regain control of their finances over time.
This article outlines the journey from being declared over-indebted to successfully repaying debt through a Payment Distribution Agency (PDA):
Step 1: Application for Debt Review
The process begins when a consumer applies for debt review through a registered debt counsellor. This typically happens when the consumer can no longer keep up with monthly debt repayments.
The debt counsellor collects detailed information about the consumers:
This financial assessment forms the foundation of the process.
Step 2: Declaration of Over-Indebtedness
After assessing the consumer’s financial position, the debt counsellor determines whether the individual is over-indebted meaning they cannot meet their debt obligations in a timely manner.
if so, the debt counsellor formally declares the consumer over-indebted in terms of the National Credit Act. All parties involved are formally notified by way of a Form 172.2. This declaration triggers important legal protections:
This stage is critical, as it provides immediate relief and creates space to restructure debt responsibly.
Step 3: Proposal of a Restructured Repayment Plan
The debt counsellor develops a revised repayment plan based on what the consumer can realistically afford after essential living expenses, whilst also considering the industry standards for repayment of debts under the NCA.
This plan may include:
The proposal is shared with creditors for consideration and negotiation.
Step 4: Court or Tribunal Approval
Once an agreement is reached—or if creditors do not respond—the repayment plan is submitted for legal confirmation through the Magistrate’s Court or the National Consumer Tribunal.
Once approved, the repayment plan becomes a legally binding court order. This means:
Step 5: Payment Through a PDA
In South Africa, the Consumer has the option to make use of a Payment Distribution Agency (PDA) like DC PARTNER PDA (ABOUT US) for distribution of their funds to Credit Providers. From the moment that the Consumers’ first installment is due (this is usually prior to the court application), the consumer begins making a single monthly payment to a registered PDA.
The PDA plays a central role by:
This system simplifies repayments and ensures consistency and transparency.
Step 6: Ongoing Monitoring and Compliance
Throughout the debt review process, the debt counsellor continues to monitor the consumer’s financial situation.
If circumstances change (e.g., income increases or decreases), the repayment plan may be adjusted through the appropriate legal channels.
Consumers must:
Step 7: Completion and Clearance Certificate
Once all debts included in the debt review (excluding certain long-term debts like home loans, unless settled) are fully repaid, the debt counsellor issues a clearance certificate.
This certificate:
Debt Review undoubtedly could make a significant difference in the life of a financially burdened Consumer. This is especially so if the process is well managed, responsibly and ethically executed, and if the Consumer stays committed and offers their co-operation as needed. DC PARTNER PDA is NCR registered payment distribution agency (NCR Registration)
Article by: Sunette Joubert from Gerstner Attorneys