What Happens To My Existing Debts When I Go Through Debt Review?

Debt review is a process in South Africa that can help people manage their debt. This process is regulated by the National Credit Act and it provides consumers with certain legal protections as they work to pay off their debts. The primary question related to this topic is what happens to existing debts when someone enters into a debt review?

The first step of any debt review is for the consumer’s creditors to be listed and provided with information about their financial situation. These creditors are then asked to accept reduced payments from the debtor based on their current income and expenses. If accepted, all future repayments will follow these new repayment terms. In addition, interest rates may also be frozen or renegotiated during the course of a debt review program.

Once an agreement has been reached between the creditor and the debtor, creditors must stop taking action against them until the agreed upon payment plan has been completed. This means creditors no longer have permission to add additional fees or charges, nor can they contact employers or other third parties about collections activities. Furthermore, credit bureaus are obligated to reflect that a person is under debt review rather than active delinquency which helps protect one’s credit score while paying back his/her debts over time.

Finally, while some aspects of existing debts remain unchanged (i.e., principal balance) due to entering into a debt review program, there are several significant benefits:

  • Debt Payment Terms: Creditors agree not to take further collection actions and freeze/reduce interest rates so that payments become more manageable for consumers given their current income and expense profile;
  • Legal Protections: Consumers gain protection from additional costs such as late fee charges since creditors cannot pursue collections activity until after completion of the agreed-upon payment plan;
  • Improved Credit Score: By reflecting “debt review” status instead of “active delinquency” on credit reports, individuals can improve their scores over time without needing fear negative impacts due to missed payments or high balances owed on accounts while under debt review proceedings.

Therefore, those who enter into a debt review program in South Africa find relief through improved terms on existing debts along with legal protections and potential improvements in credit rating – allowing them greater opportunities financially down the road once free from lingering obligations.

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