How Debt Counselling Works: A Step-by-Step Guide for South African Consumers
If you are struggling to keep up with your monthly debt repayments, here is exactly what happens when you apply for debt counselling.
Debt counselling — also known as debt review — is one of the most powerful tools available to over-indebted South Africans. It was introduced in 2007 under the National Credit Act and gives you a legal way to restructure your debts into payments you can actually afford, while keeping creditors from repossessing your home or car.
But many people hesitate because they do not know what to expect. So let us walk you through the process from start to finish, in plain language.
Who qualifies for debt counselling?
You may qualify if you are struggling to meet your monthly debt obligations and you have some form of income. Most types of credit granted under the National Credit Act can be included — home loans, vehicle finance, personal loans, credit cards, store accounts, and more. The main exceptions are municipal debt (like rates and water) and NSFAS student loans, which cannot be included in the process.
You do not need to be completely broke to qualify. If your debt repayments are simply too high relative to your income, a debt counsellor can help.
The process, step by step
Step 1: The initial consultation
Everything starts when you contact a registered debt counsellor. During your first meeting — which can often be done over the phone or online — they will review your financial situation, explain how the process works, and help you decide if debt counselling is the right option. If you decide to proceed, you will sign a Form 16, which is your formal application.
Step 2: Your creditors are notified
Within five business days of your application, your debt counsellor sends a Form 17.1 to all your creditors and the credit bureaus. This is an important moment — from this point, your creditors are legally prevented from taking new legal action against you. Your assets, including your car and home, are protected while the process is underway.
Step 3: Your finances are assessed
Your debt counsellor will gather verified balance information from all your creditors and do a thorough assessment of your income, expenses, and total debt. If you are confirmed as over-indebted, a Form 17.2(b) is issued and you are officially placed under debt review. If, after assessment, you are found to not be over-indebted, the process ends and a different form is issued.
Step 4: Negotiating with creditors
This is where the real magic happens. Your debt counsellor negotiates directly with your creditors to reduce your interest rates and extend your repayment terms. The goal is to bring your total monthly repayment down to something you can realistically afford. Interest on unsecured debt, for example, can be reduced from an average of around 22% to as low as 2.6% per annum.
Step 5: Court order
Once a new repayment plan has been agreed upon, it is submitted to a magistrate's court for approval. The court order makes the arrangement legally binding — your creditors cannot change the terms, and you are committed to sticking to the plan.
Step 6: Monthly payments begin
From your next payday, you make one single monthly payment to a Payment Distribution Agency (PDA). The PDA then distributes your money to each of your creditors according to the agreed plan. No more juggling multiple payments and due dates.
Step 7: Completion and clearance
Once you have paid off all your debts under the restructured plan, your debt counsellor issues a clearance certificate. The credit bureaus then update your record, removing the debt review flag, and you are free to apply for credit again.
What does it cost?
Debt counselling fees are regulated by law and are included in your monthly repayment — you do not pay them separately on top. The initial application fee is R50, followed by a R300 administration fee. The restructuring fee is capped at R8,000 for an individual or R9,000 for joint applications. There is also a monthly aftercare fee of 5% of your distributable income, capped at R450.
How long does it take?
Most people complete debt review within three to five years, depending on how much they owe and the repayment terms negotiated. If you receive a bonus or extra income along the way, you can make additional payments to speed up the process.
Important to know: While you are under debt review, you cannot take on any new credit. This may feel restrictive, but it is actually there to protect you — it ensures you focus on paying off what you owe without adding to the problem.
Debt counselling is not something to be ashamed of. Over 717,000 South Africans are currently in the process, and the number completing it successfully grows every year. It is a legal right, not a favour — and it could be the first step towards getting your financial life back on track.