Perhaps the first question that comes to mind when you face insolvency is “how do I declare myself bankrupt?” We understand the frustration of having to deal with creditors that threaten with legal action, and the fear of having your assets attached and sold at below-market value. You know that you will end up paying interest, sheriff, legal and storage fees, and auction commissions, in addition to the debt. It can be a never-ending cycle, but there is hope. If you are declared bankrupt, you won’t have to go through the above.

First, however, read up on our website on your question of “How do I declare myself bankrupt in South Africa?” Next, assess whether your liabilities far exceed your income, whether you have enough assets to ensure the sale thereof will realise enough benefit to the creditors, and whether you have a monthly income. If you believe that you meet the above requirements – make an appointment with our attorneys to confirm your insolvency.

They will review your financial statements, bank accounts, asset lists and the likes, which you provide. Thereafter and having confirmed that you qualify for sequestration, they will advise you regarding the process, requirements, risks, benefits, and disadvantages. They will also explain how the rehabilitation process works, and what the costs are regarding voluntary sequestration.

As to the rest of the process to declare yourself bankrupt in South Africa, it is as follows:

One of our attorneys will handle your application. The attorney will publish the intention to sequestrate in the Government Gazette and local newspapers, and notify the creditors and SARS via registered letters. This will prevent further legal action from the creditors, and from here on out, they are required to speak to your attorney. You can thus refer them to the attorney.

The attorney will draft your sequestration application, which will be handled on your behalf. The application is submitted to the High Court of South Africa, where an advocate will represent you. This means that unless instructed by the court to do so, you will not have to appear in court. The creditors will have the opportunity to oppose the sequestration application. If no opposition is received, the court will grant the sequestration order, and your estate will be surrendered. You will officially be declared insolvent/bankrupt.

The court will appoint a trustee for overseeing the estate, selling of assets and distribution of benefits to the creditors. Your attorney will negotiate to have your furniture bought from the insolvent estate and will, where applicable, negotiate to ensure that you can still drive your vehicle, and keep on paying the instalments. However, this is not always possible, so it is best to discuss the issue with our attorneys.

Once the creditors have all received their benefits (creditors who brought claims against your estate), and you have paid off the remainder, you will be able to apply for rehabilitation. Expect to be under sequestration for a period of four years, even though it is possible to be rehabilitated earlier. This too should be discussed with our attorneys.

Note that a sequestration order will be listed on your credit record, and only once you have been rehabilitated will it be removed. Your attorney will apply for the rehabilitation order and ensure that the credit bureaux remove the sequestration status once the order has been granted. All other judgements must also be removed.

You are officially rehabilitated and can once again hold directorship in a company, and apply for credit. You can enter into a credit agreement while insolvent, but must disclose your sequestration status when asked, so as to protect the creditor from reckless lending practices.

One of the benefits of voluntary sequestration is that you will not have to pay high interest rates on the remainder of the debt. As such, you can become completely debt free in a relatively short period. It is possible to declare yourself bankrupt, if you don’t have immovable property, provided that you have enough assets to ensure the realisation of sufficient benefit for the creditors.

Note that the above is only a short summary of the process. We recommend becoming informed about the topic through the information on our site, and by having one of our attorneys answer the question of how to declare bankruptcy in depth.

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.