Debt Intervention – Part 2admin
Debt Intervention – Re-Arrangement or Restructuring of debt
The National Credit Regulator will firstly attempt to re-structure a consumer’s debt to solve within a maximum period of 5 years. The NCR must consider the income and expenses of the consumer and look at future possible income and employment opportunities of the consumer when making a determination if the debt can be restructured or if it should be suspended.
The NCR will then make a recommendation to extend payment periods and reduce interest rates in an attempt to make the debt solve within 5 years. If a consumer’s debt has been re-arranged, the consumer will be required to pay all relevant credit providers in line with the payment re-arrangement.
Failure by a consumer to make payments might result in the credit providers terminating the debt intervention upon which the credit providers will be able to litigate against the consumer.
A consumer cannot apply for new credit during the period of this debt intervention and credit providers cannot enforce credit agreements that were re-arranged.
Debt Intervention – Suspension of accounts
If a consumer’s debt cannot be restructured or re-arranged, the NCR will make a recommendation to suspend all or certain accounts for a period of 12 months.
During this time, interest and fees will stop accumulating on the account. The NCR must then after 8 months re-assess the consumer’s debt and income to see if debt re-arrangement or re-structuring is possible. At this point, if re-structuring is not possible, the NCR could make a recommendation to suspend the accounts for a further 12 months. After 8 months into the extended suspension, the NCR must re-evaluate the consumer’s situation and determine if the consumer has the financial means for the debt to be restructured.
If the NCR is unable to re-structure the consumer’s debt after the extended suspension, writing off or extinguishing the debt might be considered.
Prescription of debt during suspension is also halted. The prescription period will be extended by the same amount of time as the suspension period.
A consumer cannot apply for new credit during the period of this debt intervention and credit providers cannot enforce a credit agreement which are suspended.
Debt Intervention – Extinguishing of debt
Debt will only be extinguished or written off where a consumer is unable to afford a debt restructuring or debt re-arrangement plan, and the consumer went through an initial and extended suspension of debt.
In order to achieve the write off the NCR will have to make the relevant recommendation to a court and prove that no other option is feasible for the specific consumer.
During this recommendation all or part of the total of the amounts owed may be extinguished. The extinguishing may be a percentage of the total amounts.
When debt has been extinguished a consumer will not be able to apply for new credit for a minimum of 6 months, which can be extended to 12 months. Credit providers will also not be able to enforce the credit agreements which were extinguished.