When Applying for Bankruptcy in South Africa is Best to Get Rid of Debt

Applying for bankruptcy in South Africa as an individual entails a court application for voluntary sequestration, which is a legal process with the outcome being to be declared insolvent.

If you live in South Africa and your debt has become unmanageable, then you might want to consider applying for voluntary sequestration, provided you have a monthly income, have immovable property or other assets, which if sold on auction, will realise enough benefit to the creditors, and provided your debt is substantial enough to make the process worth your while. You cannot sequestrate if you don’t have a monthly income and the above. In addition, if your debt is less than R50 000, then it would be better to apply for administration or debt review assistance. Your debts must furthermore exceed your income and available assets.

Keep in mind that the court will only approve your application to be declared bankrupt in South Africa if there is enough benefit for the creditors. Debt review is a better option if you can pay the debt off within five years. However, if your debt is substantial, which will mean that you will have to pay off over a period of ten or more years, then applying for bankruptcy in South Africa is the better option. This might be the case if you still owe a large amount on your house, vehicles, and furniture.

One of the main benefits of sequestration is that the creditors can no longer harass you or take legal steps against you to pay the debt. Indeed, once the application process commences, you are not allowed to pay any creditors, as it is illegal to prefer one creditor over the other. The court will appoint a trustee who will handle your insolvent estate, sell the assets and distribute the benefits to the creditors. The creditors may not ask for interest on the remaining 20% to be paid. You can pay the remainder of the debt in cash or, if so negotiated, pay it off over a period as agreed upon.

The amounts you will have to pay will be affordable, and because there is no interest involved, as is often the case with debt payment agreements, you will be able to quickly pay off the remainder. Once paid, you will be free of debt and can start to get your finances in order again. However, it is important to note that you cannot be a director of a company while under sequestration. You can enter into credit agreements, if so discussed with the trustee, and if you have approval.

It is wise to limit credit during the sequestration period, as irresponsible management of your finances will hinder your ability to rehabilitate at the earliest allowable date.

Disclaimer – Information provided in this article is for general information purposes only and not intended as legal advice. We recommend seeking legal guidance for all matters related to insolvency and to speak to our attorneys before relying on the accuracy of the information provided in this article to make decisions affecting your financial status.