Why see a Debt Counsellor?

Another common “debt” question is : If I get a Letter of Demand and/or the threat of legal action from a creditor, wouldn’t it be better to consult an Attorney rather than a Debt Counsellor?

Thanks to the National Credit Act, there are areas relating to debt where Debt Counsellors actually have more authority than Attorneys. This law says that a consumer (a term which applies to anyone who purchases just about anything) who has debt with which they are struggling can apply to a Debt Counsellor to be declared over-indebted. No-one else (not even an Attorney) has the authority to declare a consumer to be over-indebted.

Once a consumer has been declared over-indebted, this law also states that their creditors must co-operate with the Debt Counsellor in re-arranging the debts. This authority to re-arrange means that :
(a) The Debt Counsellor works with the CURRENT situation, and can disregard the history of the account (e.g. how far in arrears it is). If the consumer consulted an attorney, it’s probable that they would first have to make arrangements to pay all or part of any arrears to avoid legal action ;
(b) Even if a consumer’s account IS in arrears, the consumer is protected from any legal action by their creditors AS SOON AS they’ve applied for Debt Review. However, even if the consumer makes an arrangement with their creditors, anecdotal evidence has shown that this is NOT a guarantee that the creditors will not proceed with legal action ;
(c) Because the consumer’s debts are being re-arranged when under Debt Review, many creditors are prepared to negotiate a lower interest rate with the Debt Counsellor. If the debts/accounts are NOT placed under Debt Review, the original contract (including the contractual interest rate) remains in effect. Not even a Magistrates Court can order a creditor to reduce an interest rate, as the original contract is a legally binding agreement.

Before the wrath of the entire legal profession descends upon me, I must clarify that I am NOT trying to elevate Debt Counsellors above Attorneys. As a Debt Counsellor, though, I take pride in our profession and in the importance of the role that the National Credit Act has conferred on us.