Counseling Overview

In the current economic cycle many individuals are struggling to cope with debt. The same debt that was easy to manage previously is becoming too much to handle with cost of living increasing and income shrinkage month to month.

Banks and other creditors have been very aggressive in lending to consumers, but the consumer is finding it very difficult to make full monthly payments to creditors. Many consumers are finding that they are over their heads in debt and cannot manage their monthly debt payments anymore.

Thanks to the National Credit Act that came into effect in June 2007, there is an alternative to help people manage their debt. Deep in debt consumers can now apply for debt counseling with the help from the National Credit Act and a qualified counselor.

Debt counseling will protect the over in debt consumer from aggressive creditors who are quick to take legal action and not always willing to listen or understand the consumers problem. Debt counseling will protect the consumer from creditors taking legal action. In many cases the consumer and creditor benefits from debt counseling. The consumer benefits, because he gets to pay more manageable monthly payments and the creditor benefits from not having to take expensive legal action. Most of the times not recovering any debt at all. So the banks are also looking for alternatives to repossession and don’t want to repossess your assets unless they need to.

The debt counseling process can take time to resolve the consumers debt problem. The debt counseling application process takes up to 60 working days. This is a long process, but the consumer is protected within 5 working days during the application phase. The debt counselor will negotiate with the creditor on the consumer’s behalf during the application phase. The creditor is more willing to negotiate with the debt counselor than the consumer. The reason is that the creditor will know that the consumer is truly over their head in debt and cannot afford the monthly payments when he has applied for debt counseling. The creditor will realize that the consumer is actively taking steps to repay the creditor. The creditor will also know that the debt counselor is there to help take over during this process. The debt counselor is there to help the consumer manage his debt. The creditor also knows that the debt counselor is working under the National Credit Authority to look after the consumer’s legal rights.

The criteria to qualify for debt counseling are simple to understand. The main criteria is that you must have an income. You can be an employee or self employed. The income must be sufficient that you have money left after paying for your essential expenses before debt payments every month. In other words, you must have money left after paying for food, transport and other expenses to survive from day to day. The money you have left after your essential expenses is the money you have available to pay creditors. This amount will be offered to creditors as the new payment schedule each month.

The biggest mistake that indebted consumers can make is to do nothing. They wait and hope for a miracle or hope their situation changes fast in the future. They hope for an increase at work, or to win the lottery, go gambling, or hope the debt and creditor will disappear. If you leave your problem for too long, not even debt counseling will help you. You need to take action before you get a summons from a creditor. You must take action as soon as you see that your current income cannot meet all your monthly expenses. As soon as you receive a summons, your creditor does not have to listen to the debt counselor. It is as simple as that.