How long does debt review take in South Africa?

Debt review usually takes three to five years from start to finish. The paperwork at the front end moves fast, often around 60 days to get a court order, but the repayment plan itself is the long part, because it runs until your restructured debts are actually paid off.

Debt review, also called debt counselling, is the formal process created by the National Credit Act 34 of 2005 for consumers who cannot meet their monthly credit repayments. You apply through a debt counsellor registered with the National Credit Regulator. If you are found to be over-indebted, your debts are restructured into one lower monthly payment over a longer period, and your credit providers are stopped from taking legal steps against you while the process runs properly.

The stages and how long each one takes

Application. You complete an application form with a registered debt counsellor and hand over payslips, bank statements and a list of every account. This can be done in a day if your documents are ready.

Notification. Your counsellor must tell all your credit providers and the credit bureaus that you have applied. The regulations require this within a few business days of the application. From that point your accounts are flagged as under debt review.

Assessment. The counsellor works out your income, living expenses and total debt and decides whether you are over-indebted. The regulations give the counsellor 30 business days from the application to make that call.

Proposal and negotiation. The counsellor sends a restructuring proposal to your credit providers. Some accept quickly. Others negotiate over interest rates or the term. This is the stage that most often causes delays.

Court order. The restructured plan is made an order of the magistrates' court, or of the National Consumer Tribunal where all parties consent. Court roll congestion in busy districts can add weeks or months.

Repayment. You pay one monthly amount to a payment distribution agency, which splits it among your credit providers.

Clearance. When the debts covered by the plan are settled, your counsellor issues a clearance certificate and the credit bureaus must remove the debt review listing.

Why some plans run longer than others

The length of your repayment plan is a maths problem, not a fixed rule. It depends on how much you owe, what interest rate your credit providers agree to, and how much you can afford after living expenses.

• Unsecured debt such as credit cards, store accounts and personal loans is usually restructured over a period of up to about five years.
• A vehicle finance agreement is often stretched, but a car has a limited useful life, so credit providers resist very long terms.
• A home loan is usually treated separately. Your bond may be restructured over the remaining term of the loan, which can be another 15 or 20 years. In that situation you can receive a clearance certificate once everything except the bond is paid up.
• Missing payments extends the plan. Every month you skip adds to the balance and the interest.

What can slow the process down

Delays usually come from one of a few places. A credit provider that refuses the proposal forces the matter to be argued in court. Missing documents from you hold up the assessment. An account you forgot to declare has to be added later. A credit provider that has already issued summons before you applied may be entitled to carry on with that particular case.

If your counsellor stops communicating or does not file the matter in court, you can complain to the National Credit Regulator on 0860 627 627. The Regulator registers debt counsellors and can act against them.

Can you finish sooner?

Yes. Debt review is not a fixed sentence. If your income improves, you can pay more than the plan requires and shorten the term. If you receive a lump sum, a bonus, an inheritance or a retirement payout, you can settle the accounts and ask for your clearance certificate. You can also apply to leave the process, although once a court order has been granted you generally need a court to lift it. There is more on this in our guide on how to get out of debt review early.

What debt review does not do

Debt review does not wipe out debt. It reschedules it, which usually means you pay for longer and pay more interest in total, in exchange for an affordable monthly amount and protection from legal action.

It also does not cover every debt. It deals with credit agreements under the National Credit Act. Municipal accounts, SARS debt, maintenance arrears and traffic fines sit outside it.

While you are under debt review you may not take on new credit. Any credit provider that checks your record will see the debt review flag. That restriction lifts when your clearance certificate is issued.

If your debt is so large that no realistic repayment plan works, the alternative is usually sequestration under the Insolvency Act 24 of 1936, which is a very different and more drastic route. Our guide comparing debt review and sequestration sets out the trade-offs.