Can You Apply for Debt Review When Unemployed?

Are you grappling with debt and facing the uncertainty of unemployment? You're not alone. Financial hardship can strike anyone, and the subsequent stress and anxiety about the future can be overwhelming. One of the questions frequently asked by those in this situation is, "Can I apply for debt review when I am unemployed?" This article aims to provide clarity on debt review processes and your options during unemployment.

What is Debt Review?

Debt review, also known as debt counseling, is a legal process intended to help individuals who are over-indebted. It involves assessing your financial obligations and restructuring your debt payments to be more manageable based on your income. Debt review is meant to protect consumers from legal action by creditors and prevent further financial decline. Click here to leard more about debt review.

Eligibility for Debt Review While Unemployed

The eligibility for debt review often hinges on one's ability to generate income. The purpose is to renegotiate your debt payments to a more manageable level based on your current financial situation. If you are unemployed, applying for debt review is not possible. The main reason being that credit providers expect the consumer to service their debt. In the case where there is no income, credit providers will not accept debt review and neither will the debt counsellor assist the consumer. But what happens if you're unemployed?

The good news is that unemployment doesn't automatically disqualify you from applying for debt review. However, there are a few conditions:

1. Alternative Income Sources: If you have alternative sources of income, such as rental income, a pension, or investment returns, these can be used to establish your ability to pay creditors under a restructured plan.

2. Support System: Sometimes, if you have a partner or family members willing to assist with payments while you're unemployed, this support can be taken into consideration.

3. Unemployment Benefits: If you receive sufficient unemployment benefits that can cover restructured debt repayments, this could also qualify you for debt review.

The Process of Applying for Debt Review

The process typically starts with a consultation with a certified debt counselor. They will review your financial situation in detail, including all your debts, assets, income, and living expenses. If you have some form of income or are likely to secure employment soon, the counselor may accept your application and negotiate with creditors on your behalf.

What If You Have No Income?

If you have no income at all, a debt review may not be possible because there are no funds to work with. However, do not lose hope. A debt counselor can advise you on other options, which may include:

• Payment Holiday: Arranging for a temporary pause on debt repayments until you find employment. This can be done to buy time while you look for a job or employment.
• Selling Assets: Liquidating assets to clear some of your debts.

Being proactive is crucial when you're unemployed and in debt. Contact your creditors to inform them about your situation; many have hardship programs for such cases. Also, consider adjusting your budget to reduce expenses wherever possible.

At Debt Sage our main goal is to help all South African consumers struggling to service their debt. However, some requirements need to be met to qualify for debt review. The National Credit Act (NCA) specifies that for a consumer to qualify for debt review they must be gainfully employed or earning some income every month. 

When a consumer applies for debt review, the debt counsellor negotiates with the credit providers on behalf of the consumer for a debt repayment plan that is manageable. The debt counsellor negotiates for lower interest rates and longer repayments period. This implies that the consumer ends up paying lower monthly instalments to service their debt. 

As soon as a new payment plan is agreed upon and put in place, the role of the consumer is to make consistent monthly payments in line with the new agreed payment plan. If one is unemployed, it implies that they will not be able to make the monthly payments and the debt review process will not function effectively. The creditors require that the consumer will be able to actively pay the new repayment plan. 

In instances where the consumer is unemployed but receives income from rentals, government grants, UIF, alimony, etc, they can apply for debt review.  The income streams will suffice to cover the required monthly payments under the debt review arrangement. There will be a need for the consumer to put that in writing in the form of an affidavit which will form part of the documentary evidence for the stream of income. 

In conclusion, while unemployment presents challenges for applying for debt review, it does not shut the door completely. Evaluate your income options and seek professional advice. Remember, taking action early can lead to better outcomes and provide peace of mind during a difficult time.

I am unemployed but married in Community of Property (COP) can I still qualify for debt review? 

If you are unemployed but married in COP, you can still apply for debt review provided that the spouse is earning an income. The debt review application will be treated as a joint application and your spouse’s income will be declared as the income to for the purposes of paying the monthly installment. This has the benefit of buying you time to find a job, also you don’t lose your assets. However, the spouse's income has to be sufficient to cover the required monthly debt repayment under debt review. In some cases, we have submitted retrenchment letters and asked the credit providers to assist the consumer nonetheless. But then again each case is debt with on its merit. 

To assist you,  first  we have to do an obligation free assessment (quote). For us to prepare that we will need your ID number to pull up your credit report. If married in COP, l will need your spouse's ID number as well.

If happy and would like to proceed with debt review, then we will need the following documents:

• Pay slip
• ID copy
• Proof of residence

If you are financially stressed and do not know how to resolve your debt burden, contact Debt Sage to get assistance.