To offer result to the NCA's customer protection purpose of attending to and dealing with over-indebtedness, as stated in section 3( g), the debt evaluation procedure was presented, which supplies for financial obligation re-organisation in cases of over-indebtedness. However, the Act does not make every effort to deal with over-indebtedness by providing a discharge of debt to over-indebted consumers - new law for debt review exit.
In regards to section 86 of the NCA, a natural person customer who is experiencing difficulty or inability in paying his credit arrangement financial obligation can use to a debt counsellor for financial obligation evaluation. All parties to the financial obligation evaluation process (customer, credit company and debt counsellor) must take part in the procedure in great faith.
If the debt counsellor discovers the consumer not to be over-indebted (which is highly not likely) the customer is at liberty to approach a court on application to pronounce on whether the customer is over-indebted or not - . If the financial obligation counsellor identifies that the consumer is not over-indebted but likely to end up being over-indebted, the financial obligation counsellor may submit a financial obligation restructuring proposal to the consumer's credit suppliers.
If not all the credit suppliers concur, the proposition has actually to be referred to court with a "suggestion" that the court officially declare the consumer over-indebted and restructure his financial obligation in accordance with the repayment proposal. what is the debt review process. In practice, such a financial obligation restructuring proposal is likewise made to the credit providers of a customer where the financial obligation counsellor figures out that the customer is indeed over-indebted and, if not agreed to by all the credit companies, the proposition needs to be described court in accordance with section 86( 7 )( c).
It is essential to keep in mind that the financial obligation counsellor does not have any power to "state" a customer over-indebted, but is simply obliged to make a "determination" concerning the customer's over-indebtedness and to refer it to the court with a suggestion (a proposition) on how the financial obligation should be restructured - what is the difference between debt consolidation and debt review ().
The court that is approached for such debt restructuring will be a Magistrate's Court and it is to be kept in mind that the court is not obliged to state the consumer over-indebted and make a restructuring order, however that it has a discretion to be exercised judicially to do so. Area 88( 1 )( b) validates that a court is not obliged to state a customer over-indebted and can likewise declare a consumer "not over-indebted" if it appears from the realities presented to the court (either by the customer himself in terms of section 86( 9) or by means of a restructuring application in regards to section 86( 7 )( c)) that the consumer is indeed not over-indebted as pondered by area 79 of the NCA. prescribed debt after exiting debt review.
It is to be noted that the Act does not prescribe a specific time duration within which the financial obligation evaluation process, consisting of the three stages described above, must be settled. Typically, the preliminary procedure before the financial obligation counsellor need to be completed within 60 days from the date of the financial obligation review application, at which phase the matter ought to be referred to court either for an authorization order or for the court to think about and approve a financial obligation restructuring order.
This duration can vary from a number of months to a number of years. In it was held that a financial obligation counsellor as a statutory functionary is obliged, consequent to evaluating a consumer's debt in regards to area 86, to refer a proposal to the Magistrate's Court to ensure orders, failing which he has actually not abided by his responsibility as a debt counsellor.
Obtaining financial obligation review in regards to area 86 has a variety of effects: a Form 17. 1 must be sent, which notifies the credit suppliers of the application for financial obligation evaluation, and the customer's name gets listed with credit bureaus when the financial obligation counsellor accepts his financial obligation evaluation application (judgment given exiting debt review).
2 is sent to credit providers and credit bureaus, upgrading them on the development with the financial obligation review. Once the consumer's initial application for debt review is received by the financial obligation counsellor, a moratorium on the enforcement of the arrangement through a judicial procedure begins by virtue of the provisions of area 88( 3) checked out with area 86( 4 )( b)( i) and Form 17.
This moratorium continues to use when the debt counsellor, as he is supposed to do, refers a debt rearrangement proposal to court and the court consequently makes a restructuring/rearrangement order. When such an order is made, the moratorium remains in location as long as the customer continues to pay in accordance with the debt restructuring order - .
Nevertheless, the debt evaluation procedure does not provide any discharge of the consumer's credit arrangement financial obligation, due to the fact that it is a step that seeks to enable him to eventually repay all such credit contract debt. The truth that credit providers are alerted when a customer uses to a debt counsellor guarantees that the credit service providers observe the moratorium on enforcement imposed by area 88( 3) and the customer is safeguarded versus financial obligation enforcement relating to the arrangements that are being evaluated.
Consequently, while the consumer is under debt review prior to the financial obligation counsellor and likewise later when he is subject to a financial obligation restructuring order, area 88( 1) forbids him from participating in any brand-new credit contracts. This bar versus taking up new credit kicks in when the customer "has actually submitted an application in regards to area 86( 1 )", which can be construed to mean that it uses from the minute that the customer files his application for financial obligation review with the financial obligation counsellor and hence even prior to the Type 17 - .
The NCA even more supplies that a customer who went into the financial obligation review process and whose debts have actually been successfully "re-arranged" (restructured) in terms of Part D of Chapter 4 can be approved a clearance certificate in specific circumstances as discussed below. Such a certificate then serves to help with the consumer's exit from the "completed" debt review process.
It was needed that a financial obligation counsellor who received an application for a clearance certificate had to investigate the scenarios of the specific debt rearrangement. The debt counsellor was then needed to release a clearance certificate in the proposed type if the consumer had all the obligations under every credit contract that underwent the financial obligation rearrangement order or contract, in accordance with that order or arrangement.