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A over indebted consumer can apply for debt counselling at a qualified debt counsellor. The consumer will apply for debt counselling, because his income is not sufficient to make the full installment on his normal monthly installment each month.

The debt counsellor will assist the over indebted customer in the application process by negotiating a new affordable monthly payment plan for the customer. The first action the debt counsellor will take is to notify all creditors that the customer is applying for debt counselling and no legal action can be taken against the customer. The second action the debt counselor will take is to notify the National Credit Regulator that the customer is applying for debt counselling. Th credit rating agencies will be notify by the regulator of the customer’s intension.

The credit rating report will show that customer is in debt counselling. No credit can be given to any person who is in debt counselling or applying for debt counselling. When a customer applies for debt counselling he will stay in debt counselling until he pays off all his debt or decides to leave debt counselling. The debt counsellor will notify the regulator that the customer applied for debt counselling and the regulator will inform all the credit rating agencies.

When the customer comes out of debt counselling the note on the credit file will be removed and the file will not show that the customer was ever in debt counselling. This is a big advantage for the customer. The credit file will only show if a customer is currently in debt counselling and not that he was in debt counselling in the past. After a client completes his debt counselling there will be no trace on record that customer was in debt counselling.

We don’t know, if creditors will make notes of debt counselling, because debt counselling is still new to banks. If the bank was a creditor when in debt counselling, the bank will obviously know that this customer was in debt counselling before. Nothing stops the bank from making a note on the customer’s file at the bank that he was in debt counselling before. So if the client comes back for a loan after debt counselling they will know that this customer has been in debt counselling.

All debt was settled before the customer came out of debt counselling, so we don’t think the banks will penalize the customer for being in debt counselling in the past. The banks might ignore that the customer was in debt counselling and only look at the customer’s current financial position.

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