Why You Should Get Help If You Are About to be Declared Insolvent

Most applications to the High Court for sequestration are for friendly compulsory sequestrations, or voluntary sequestrations. However, you should seek help immediately if you are declared insolvent. Indeed, before being declared insolvent, you should already seek legal representation.

If it is an aggressive sequestration application, which is normally the case with banks against individuals, the creditors will be negative towards you. It is thus better to apply for voluntary sequestration, before creditors have you declared insolvent.

You can have a friend or family member to whom you owe money bring a court application for sequestration of your estate, and thus to have you declared insolvent. In this regard, you will lose less than with an aggressive sequestration action against you.

The above being said, creditors don’t easily bring applications to court to have debtors declared insolvent, because the costs of such are high and the process complex.

The creditor, who wants to have you declared insolvent, must have established a claim against you for money owed. The creditor also knows that the court will only approve the sequestration application if the sequestration will ensure enough benefit to the creditors. And lastly, you must have committed an act of insolvency.

Creditors will thus rather follow other forms of getting compensation for debt owed to them, including:

  1. Attachment of a part of your salary by means of a court order. This also entails you paying for legal fees, collection costs, and relevant interest.
  2. Attachment of debt that is owed to you by means of a court order. You must also pay the interest, and collection and legal fees.
  3. Attachment of your assets and the selling thereof at auctions, where the assets normally don’t go for much. In addition, auction, storage, and sheriff’s fees must be paid from the proceeds of the sale. Also the collection commissions and attorney fees must be paid. The remainder is used for payment of the debt.

From the above, it becomes clear that unless you have substantial assets and the creditors will benefit from forced sequestration, they will most probably follow one of the above routes. You will pay interest and various additional costs. The creditors will keep on harassing you to sign agreements, whereby you acknowledge the debt and state your intention to pay it off. You will keep on paying interest and stay in debt for a long period, making it difficult to get credit, open a bank account, rent a house, and more.

It is thus better to get help if you are declared insolvent, but even better to get legal help before it happens. If a forced sequestration application is made, our attorneys can represent you and oppose such. We can negotiate in terms of buying back your furniture from the insolvent estate at the reduced value and, where possible, the same with one of your vehicles. We can also help with the rehabilitation process, and provide you with legal advice to help minimise your losses.

To come back to voluntary sequestration – if you have substantial debt and are unable to pay back the debt, rather speak to our attorneys regarding possible routes to follow, in order to negotiate with creditors, enter debt review or voluntary sequestrate.

With the voluntary sequestration, even though your furniture will be written up, the furniture will not be removed, and we will negotiate a buy-back. You may also be able to still drive your vehicle. You will, however, lose your house in the process, but will have adequate time to find a new abode, and will be able to start over without any debt.

In addition, creditors will not be able to harass you, will not be able to attach part of your income, and will also not be able to add interest. As such, you will be able to get rid of your debt in a period of a few months to two years. Creditors from before the sequestration will not be able to bring new claims against your estate, and once the allowable period has passed, you can apply for rehabilitation with our assistance.

Applying for voluntary sequestration is thus preferred to forced sequestration, ongoing debt collections, judgements, and attachments of your income. Get help today if you are about to be declared insolvent, are insolvent and want to apply for voluntary sequestration, need assistance in opposing a forced sequestration application, or require assistance in becoming rehabilitated.

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.