Let’s be realistic: Even if your Home Loan or Vehicle Finance account is in arrears and the credit provider (bank or vehicle financier) is sending messages and letters which are getting more and more threatening, entrusting your valuable asset to a Debt Counsellor can still be a scary prospect. Can the Debt Counsellor really safeguard the house or car? Aren’t there stories about people who’ve applied for Debt Review and have still lost their houses or vehicles?

Firstly, let’s answer the most important question: “Can a Debt Counsellor really safeguard my house and/or car? YES, a Debt Counsellor can absolutely safeguard a house or car by placing the account under Debt Review. How? By relying on the National Credit Act, in which Section 88(3) says: “A credit provider who receives… notice in terms of Section 86(4)(b)(i) may not exercise by litigation or other judicial process any right or security under that credit agreement…”

What does this legal-speak actually mean? Let’s break it down:

• It mentions Section 86(4)(b)(i), which is the section of the National Credit Act that states that consumers can apply for Debt Review, and that the Debt Counsellor must then notify their creditors and the credit bureaus;
• It goes on to say that, once this has been done, the creditors “may not exercise by litigation or other judicial process any right or security under that credit agreement” i.e. they may not proceed with legal action.

Are there any exceptions to this?  Well, yes. Section 86(2) says: “An application…may not be made…and does not apply to a particular credit agreement if, at the time of that application, the credit provider under that credit agreement has proceeded to take the steps contemplated in Section 130 to enforce that agreement.” If we translate this into everyday English, it’s saying that an account (including a Home Loan or Vehicle Finance account) cannot be placed under Debt Review if the credit provider has already (i.e BEFORE the client has applied for Debt Review) proceeded with legal action. This means that the credit provider just have enrolled the matter at Court, and that a Summons has been issued. Aside from legal action having commenced, though, the creditor has no other grounds to prevent the account from being included in Debt Review and legally protected. It doesn’t matter how far in arrears the account is, how large the outstanding balance is or that they’ve handed it over to their “legal department”.

So, if placing a Home Loan or Vehicle Finance account under Debt Review safeguards it, why the stories of Debt Review clients who have lost their houses or vehicles? Well, there are certain requirements which the Debt Counsellor has to fulfil in order to ensure that the legal protection of the asset remains in effect.

• Firstly (and this may seem so obvious as not to need mentioning, but anyway…): the Debt Counsellor must notify the creditors of the Debt Review application, which is done by sending a Form 17.1. If this is not sent to the creditors, they could proceed with legal action.
• Secondly, the Debt Counsellor must (within 30 business days of the client applying for Debt Review) confirm to the creditors whether or not they’ve assessed the client to be over-indebted. This is done by sending a Form 17.2.
• Thirdly, within five business days of sending the Form 17.2, the Debt Counsellor must also send a Restructuring Proposal to the creditor(s). The Debt Counsellor also has a duty to ensure that this proposal is “reasonable”. For example, it would not be reasonable to offer R100.00 per month on a Home Loan with an outstanding balance of 1-million Rand, or to propose that it’s going to take all of 25 years to pay a Vehicle Finance account in full. Although sending an “unreasonable” proposal or one which is not accepted by the creditors does not terminate the Debt Review, it does mean that there’s a likelihood of creditors opposing the Application. This means that the Magistrate hearing the Application has to decide whether or not to grant it. If the decision is not to grant, the Debt Review is then terminated and the client no longer legally protected.
• Fourthly, the Debt Counsellor should ensure that the matter (i.e. the Debt Restructuring Application) is enrolled at Court within 60 business days of the original Application date. This is especially important if the creditor(s) have not accepted the Restructuring Proposals, as they then have the right to terminate the Debt Review (and withdraw their account) after the 60 business days have elapsed. Once the matter is enrolled at Court, however, they may not terminate their account.
• Fifthly, the Debt Review client must make their agreed payments. Failure to do so means that they have breached their Debt Review process, and creditors can then immediately proceed with legal action.

In summary, then, a Debt Review client who has a consented Proposal or granted Court Order and is making their payments in accordance with this Proposal or Order is absolutely protected and will not lose their property or vehicle.