Avoid debt collectors, choose debt counselling

There are two things you can do when you are struggling to pay your debt. You can either let your creditors hand your debt over to debt collectors – or you can let debt counsellors help you deal with your debt.

JustMoney spoke to Carla Oberholzer, debt advisor at DebtSafe, about the difference between these two and their implications.  

Tip: Take control of your debt and apply for debt counselling

“When it comes to debt counselling, you are taking action and opting for debt counselling to clear your debt. On the other hand, debt collection gives you no bargaining power whatsoever and reflects action against you,” says Oberholzer. 

It’s important to take responsibility for your finances rather than ending up in the hands of a third party such as a debt collector, she says. 

What is debt collection? 

Debt collection is when an attorney, a person who is an agent of an attorney, or a registered debt collector collects – on behalf of the credit provider – an outstanding amount from you. Also collected will be lawful interest, admin costs, and collection fees, which by law is capped to certain amounts.

According to Oberholzer, debt collectors are limited in their legal abilities to retrieve unsecured debt. However, when it comes to secured debt – through relentless efforts – they can take back your assets to pay off a debt owed to credit providers.

Therefore it’s important that you rather communicate with your creditors if and when you see that you won’t be able to make certain payments.  If that fails, consider debt counselling, says Oberholzer.

What is debt counselling?

Debt counselling is a debt relief programme or process which is handled under the regulation of the National Credit Regulator (NCR). It’s built to drastically reduce your monthly debt repayments and to completely fix your credit score.

“Because the process is backed by the National Credit Act (NCA), you will receive legal protection against your creditors – also keeping your assets, such as your house or car, safe from repossession,” says Oberholzer.

The process is also designed in such a way that you are enabled to pay your debt, as well as your family’s vital living expenses.

On completion of the process, a debt counsellor will issue you with a Clearance Certificate. You can use this to make sure any negative information is removed from your credit report.

When should you consider debt counselling?

Oberholzer says you should think about debt counselling when your credit profile is in a terrible state, you’re too scared to open bills, or you’re skipping certain payments so that other bills can be paid. Moreover, if you were declined for loans due to a bad credit record, it might be time to apply for debt counselling.

Worrying about your debt can take a large physical and emotional toll, with serious side-effects such as digestive-track issues, depression, a frailing immune system, and an inability to concentrate. That’s why the NCA identified debt counselling as a solution.

It focusses on fixing your debt worries by reducing your debt obligations drastically. Better still, your credit profile will be cleared upon completion of the programme.

Please note that you should be employed or receive a regular form of income if you want to apply for debt counselling.

Can you still apply for debt counselling if your debt has been handed over to debt collectors?

Oberholzer says it’s possible to apply for debt counselling when you’ve been handed over. However, it gets technical.

“If you have received a summons before entering debt counselling, a debt counsellor will not be able to include that account in the debt counselling process,” says Oberholzer.  

However, the debt counsellor can try to convince that creditor to take part in the debt counselling programme, but ultimately it remains the creditor’s decision whether or not to participate.

Oberholzer says provisions can be made to accommodate the necessary summonses in your new budget outline or recommendation.

If you have any complaints regarding your debt you can consult the NCR or the Council for Debt Collectors.

JustMoney can help you lift your debt burden. Fill in this debt consolidation form and a consultant will get in touch with you.