The other day, a client inquired about the purpose of a clearance certificate within the context of debt review in South Africa and why it’s necessary.
A debt review clearance certificate is a document issued to a consumer in South Africa upon successful completion of the debt review process. It verifies that the consumer has paid off all the debt obligations he had under a debt review court order or debt review repayment plan. Let’s unpack this to get a better understanding of why a debt review clearance certificate is required. Below is a few more questions that will help you to understand what a debt review clearance certificate is and why it is needed.
What is the purpose of a debt review clearance certificate?
The purpose of a debt review clearance certificate is to serve as formal confirmation by your debt counsellor that you have successfully completed the debt review process in South Africa. The clearance certificate signifies that you have fulfilled your obligations under your debt review plan by fully repaying the debts included in the arrangement.
It allows you to demonstrate to your creditors and other parties that you are no longer under debt review and have effectively managed and paid off your debts, enabling them to start rebuilding your financial reputation and creditworthiness.
What happens after a debt review clearance certificate is issued?
After a debt review clearance certificate is issued by your debt counsellor two important tasks will happen:
- The debt counsellor will update the Debt Help System, this system is administered by the National Credit Regulator, and it keeps record of all consumers on debt review in South Africa. Once this system is updated to indicate that you are no longer on debt review, all credit buraus in South Africa will be updated and the debt review listing on your name will be removed from your credit profile.
- The debt counsellor will notify all your creditors that you have concluded the debt counselling process and that they must update their internal records to indicate that you are no longer on debt review.
How long does a debt review clearance certificate take?
Once your debt counsellor received all paid up letters from your creditors he can issue a debt review clearance certificate. As mentioned above this must be done by updating the Debt Help System and notifying your creditors.
To update the Debt Help System and notify all the credit buraus will happen within seven business days.
For your creditors to update their internal systems can take up to thirty business days depending on the creditor.
How long after a debt review clearance certificate is issued can I buy a house or car?
The timeframe for buying a house or car after you have obtained a debt review clearance certificate can vary depending on several factors:
- Credit Score: Your credit score plays a significant role in your ability to obtain financing for a house or car. Even with a debt review clearance certificate, if your credit score was significantly affected by past debt problems, it may take some time to rebuild your score to a level where lenders are willing to offer you favorable terms.
- Lender Policies: Different lenders have varying policies regarding lending to individuals who have completed debt review. Some lenders may be more willing to work with you soon after receiving your clearance certificate, while others may prefer to see a longer track record of responsible financial behavior post-debt review.
- Down Payment: The amount of money you have available for a down payment can also impact your ability to purchase a house or car. A larger down payment may make you a more attractive borrower to lenders and improve your chances of approval.
- Income Stability: Lenders will also assess your income stability and ability to repay the loan. If you have a steady income and can demonstrate affordability, you may be more likely to secure financing sooner.
It’s essential to work on improving your financial profile by responsibly managing any remaining debts, budgeting effectively, and monitoring your credit score.
How do I get my debt cleared?
If you are still on debt counselling and want to get a debt review clearance certificate there is two things you can do:
- Settle your remaining debt – You can ask your debt counsellor to request a settlement offer from your creditors. Usually, your creditors will be willing to offer a good discount on the balance you still owe to them. You must however have the cash available to settle with them.
- If you were on debt counselling but stopped paying your debt for any reason and a period of three years has passed since you made your last payment, you can raise a prescription claim on the remainder of your debts. If these accounts did prescribe, your debt counsellor can issue a debt review clearance certificate to clear your name.
How to remove debt review status without a debt review clearance certificate?
If you still have debt and want to be removed from debt review your can bring an application to court to have the debt review listing on your name, be removed. If you are interested in this process, please follow this link to get more information on the debt review removal process.
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Thank you again, and keep on wiping those debts!
Jacques Botha – Registered Debt Counsellor
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