“A POUND OF FLESH!” Shouted Shylock. Why did he want that, what is it? It is a payment that is owed, which may be collected in a cruel or vengeful way. This classical aphorism dates to 1596 in Shakespeare’s Merchant of Venice. In this play, a creditor has a contract with the debtor that demands the debtor to give him a pound of his flesh, or body, in payment. Such payment method would harm the debtor greatly; however, it was in their contractual agreement.

The Creditor continued to insist that the debtor pay of his own flesh. For many people who are drowning in debts today, fees, interests and the capital of their debts may be overwhelming, and it may appear as though the creditors are cruel and continually insist on a pound of flesh from them, this is exacerbated by the uncertain economic climate and high interest rates.

Is there no reprieve for debtors? This article seeks to explore a legal avenue which may be considered by debtors to help them manage their debts through debt review.

WHAT IS DEBT REVIEW?

It is a legal process tailored to help debtors who are struggling to pay their debts. In terms of Section 86 of the National Credit Act 34 of 2005, an overwhelmed debtor may approach a person qualified as a debt counsellor, this person is “your go to person”. The debt counsellor will make payment arrangements and plan with the debtors creditors, the debt repayment will consequently be reduced to manageable payments.

This debt review process technically allows the debtor a breathing space and an opportunity to rebuild their finances.

HOW DOES DEBT REVIEW WORK?

The creditor first applies to be placed under debt review. The debtor counsellor will in turn assess whether the debtor is overindebted and accordingly assess the debtor’s income and compile debts and if the debtor is over indebted, that is to say, the debtor’s income is not enough to enable the debtor to honour his/her financial obligations whilst having enough left to sustain his/her needs and of those dependent on him/her.

The debt counsellor will approach the creditors to negotiate monthly repayment of the debt as well as the associated interests thereto. The Debtor at all times remains liable for the fees of the debt counsellor at a rate regulated by the National Credit Regulator (NCR).

Once the debt counsellor and the creditors agree as to the monthly repayments and negotiated interests, the debt counsellor will apply to the magistrate’s court for the debtor to be placed under debt review.

WHAT ARE THE ADVANTAGES AND DISADVANTAGES OF DEBT REVIEW?

The debt review process will not fare well for people who are not really determined to settle their debts, one must be intent to finalize the whole matter and be willing to do more to pay their debts and have strict discipline.

Debt review offers the following reprieve:

The debtor gets a go to person who will walk them through the whole process, negotiate on their behalf, the interest, and payable instalments.

The debtor only has to pay one instalment to the debt counsellor and the counsellor will apportion it according to the creditors.

No contact, harassment, or pressure from the creditors

The debtor is guaranteed enough funds to pay for their necessary living expenses.

No creditor may take legal action against the debtor and the debtors’ assets during this period, will be protected against legal action.

On the other hand:

The debtor will not be able to apply for credit, at least without the debt counselor’s approval.

The debtor gets listed on the credit bureau.

The debtor will have an additional financial obligation to pay for the debt counselling fees.

The debtor still must pay the debts and it may take longer to finish the debt repayment.

When one is indebted, it is advisable that they at least consult a knowledgeable attorney who can best advise them on the legal avenues and also secure their best interests.

Reference List:

• National Credit ACT 34 of 2005.