Understanding Why You Can't Cancel Debt Review Voluntarily and What to Do When a Creditor Terminates Your Account

Debt review is like a helping hand for individuals struggling with heavy debt, offering legal protection and a clear path to financial recovery. However, some clients may feel confused about why they can't cancel their debt review application whenever they want or may be surprised when a creditor says their account has been terminated. This blog post is here to help clear up these questions, focusing on the legal aspects of debt review and giving advice on how to deal with creditor account terminations. 

Why You Can't Cancel Your Debt Review Voluntarily

Entering debt review is a serious commitment that comes with legal obligations. Once you voluntarily enter debt review, the process is governed by the National Credit Act (NCA), and your financial situation is under the supervision of a registered debt counsellor. The reason you can't just cancel your debt review application at will is to protect both you and your creditors.

1. Protection from Creditors: Debt review provides protection from legal action by your creditors, ensuring that your assets are safe while you work on paying off your debt. If you were allowed to cancel your debt review at any time, you would lose this protection, and creditors could immediately take legal steps against you, including repossession of assets.
2. Legal Process: Exiting debt review isn't as simple as opting out. You need to pay off all your debts in full with an exception that you only have a home loan left. Only once all debts are settled  can a clearance certificate be issued, which only a registered debt counsellor can provide you with officially removing you from debt review.
3. Credit Bureau Records: Your status under debt review is recorded with the credit bureaus. Until a clearance certificate is issued, this status will remain on your credit profile, 

What to Do When a Creditor States Your Account Is Terminated

Receiving notice from a creditor that your account has been terminated can be alarming, especially when you're under the impression that payments are being made through the debt review process. It's important to understand the roles involved and take immediate action:

1. Understand the Role of the Payment Distribution Agency (PDA): The debt counsellor does not directly make payments to your creditors. Instead, payments are handled by a Payment Distribution Agency (PDA), which collects your monthly payments and distributes them to your creditors according to the debt review plan. If a creditor claims non-payment, it's essential to verify whether the PDA has been making the payments correctly.
2. Request Proof of Payments: If a creditor alleges that they haven't received payments, you should request proof of payments from your debt counsellor or PDA. This documentation will show whether payments were made and when they were sent to the creditor.
3. Communicate with Your Debt Counsellor: If there's a discrepancy, immediately inform your debt counsellor. They can help resolve the issue, whether it's an error on the part of the PDA or a misunderstanding with the creditor. Your debt counsellor may also need to renegotiate the terms with the creditor or provide additional documentation to prove compliance with the debt review plan.
4. Addressing Termination Notices: If a creditor has terminated your account, it might mean they are no longer participating in the debt review process. This situation is complex and requires immediate attention. Your debt counsellor can assist in understanding the reasons behind the termination and guide you on the best course of action, which may include seeking legal advice or making alternative arrangements to settle the debt.

Conclusion

Debt review is designed to help you regain financial control, but it's also a process bound by specific legal requirements and procedures. Understanding why you can't voluntarily cancel your debt review and knowing how to respond if a creditor terminates your account are crucial for successfully navigating the path to financial freedom. Always keep the lines of communication open with your debt counsellor and be proactive in resolving any issues that arise during the debt review process.