Understanding Bankruptcy in South Africa and Why Debt Review may be a Better Option.
When faced with overwhelming debt, many South Africans consider bankruptcy as a way out. However, before taking this drastic step, it’s essential to explore alternatives like debt review, debt consolidation, and debt counselling, offered by the best debt counselling company in Port Elizabeth / Gqeberha. These solutions can provide relief without the long-term consequences associated with bankruptcy. Debt review, in particular, is a lifeline for individuals seeking to regain control of their finances while avoiding the stigma and financial limitations of bankruptcy.
How Bankruptcy Works in South Africa
Bankruptcy, formally known as sequestration, is a legal process where a person declares themselves insolvent and seeks relief from creditors. The court appoints a trustee to sell the debtor’s assets and distribute the proceeds among creditors. While this may eliminate certain debts, it comes with severe consequences, including:
- A loss of control over your financial affairs.
- Damage to your credit record, lasting up to 10 years.
- Restrictions on entering into new financial agreements.
- Potential harm to your reputation.
Why Debt Review is a Better Option
Debt review is a structured process regulated by the National Credit Act (NCA). It’s designed to help over-indebted consumers manage their debts without losing their assets. With the assistance of a registered debt counsellor, you’ll receive a restructured repayment plan that is affordable and legally binding, protecting you from creditor harassment and legal action.
5 Key Differences Between Bankruptcy and Debt Review
- Asset Protection:
- Bankruptcy: Your assets most likely will be sold to repay creditors.
- Debt Review: You retain your assets, such as house and vehicles while repaying your debt.
- Credit Record Impact:
- 2 years from the date you are no longer considered bankrupt
Bankruptcy: Negatively affects your credit record for up to 10 years. –Once a bankruptcy form is filled, it appears on your credit history for anywhere between 5-10 years from the date you declare bankruptcy.
There are two important details about the bankruptcy period that stay on your credit report.
Chapter 7 Bankruptcy – 10 Years from the filing date
Chapter 13 Bankruptcy – 7 years from filing date
*Above is based on information from Experion – Credit Bureau.
- 2 years from the date you are no longer considered bankrupt
- Debt Review: Shows as a debt review status but can be removed upon successful completion. the sooner you pay your debt up the sooner the debt review status is removed, and your credit record is rehabilitated. Once your debts are settled (excluding bond) You will receive a clearance certificate that is updated within 21 days of issuing and all negative data on your credit record is expunged.
- Legal Proceedings:
- Bankruptcy: Requires court approval and generally legal costs.
- Debt Review: Handled by your debt counsellor and the debt review and legal costs are covered in your reduced monthly debt review repayment.
- Eligibility for Financial Products:
- Bankruptcy: Severely limits your ability to access credit for an extended period. The attorneys who assist you with your bankruptcy are there to only provide assistance to have the legality of it seen to, once done you are on your own.
- Debt Review: Allows for financial rehabilitation, enabling access to credit after completing the process.
Under debt review you are assisted with a budget, a way forward, assistance and support through the process and rehabilitated back into the credit market with a new understanding of cash flow management.
- Stigma and Stress:
- Bankruptcy: Carries a social stigma and can be emotionally taxing especially when needing to auction or sell off assets.
- Debt Review: Provides a structured, hopeful path to financial freedom without the stigma and stress of assets being sold to cover debt.
Why Choose Debt Review?
Consolidate your debt without taking another loan. If you’re struggling with debt in Port Elizabeth/Gqeberha, DCGsa can help. We are passionate about assisting consumers to regain control of their finances with dignity and hope. With over 15 years of experience, we have successfully guided many South Africans out of debt, proving that debt review is not just a solution but a fresh start.
Conclusion: Choose a Brighter Financial Future
Bankruptcy might seem like the only option, but debt review offers a better path. At DCGsa, we are committed to empowering you with the knowledge and support needed to make informed decisions.
Start Today with a Free Assessment!
Taking control of your finances starts with a simple, obligation-free assessment. This quick process will give you clarity about your debt situation and a customized solution tailored to your needs.
Contact us today to get started!
📞 Call us at 086 100 1047
📧 Email us at help@dcgsa.co.za
🌐 Visit our website: www.dcgsa.co.za
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