Help on How to Apply for Insolvency in South Africa
If you want to know how to apply for insolvency in South Africa, first read through our sequestration or liquidation pages and then make use of our legal expertise in helping you to apply for insolvency. Sequestration applies if you are a natural person and liquidation if it is a business entity, such as a close corporation, private company, or public company. Below is the process for applying for insolvency, assuming you want to apply for voluntary sequestration in South Africa
How it Works
The lawyer helps you determine whether you qualify for sequestration or not. To qualify, you must have immovable property or at least enough assets to be surrendered for sale of which the benefits of sale will be enough to ensure the minimum required benefit for the creditors. You must have enough funds to pay for the sequestration process and must have an income to pay the remainder of the debt, which is normally around 20%.
The application process entails the placement of an advert regarding your intention to sequestrate in the Government Gazette and a relevant local newspaper to notify creditors. Once the ad is placed, further legal action against you is prohibited. You sign an ability statement in front of a Commissioner of Oaths. The lawyer then submits the affidavit to the local magistrate or to the Master of the Court. SARS is notified about the surrendering of the estate. Once done, all the creditors receive a registered letter regarding the voluntary surrendering of your insolvent estate. The court date is set and the creditors have an opportunity to object. An advocate will represent you in court.
The court rules on the application and, if granted, appoints a curator who handles the financial affairs, like distribution of the benefits on your behalf. Keep in mind that you must at minimum pay 20 cents out of the rand to the creditors. One advantage of applying for insolvency in South Africa is that the debt owed to creditors cannot accrue more interest. If you make a normal debt repayment arrangement with the creditors, you must still pay accrued interest, which could keep you in debt for years.
As part of the process, you will get a document that lists your assets, including household items. The valuer determines the value of items at a market-related price and an auction is held for sale of the assets and household items. The curator distributes the benefits to the creditors and you pay the balance. This can be paid over a period of 18 to 24 months if so negotiated. You will remain insolvent for a period of two to five years, depending on the circumstances of your financial situation. You can in specific instances apply for rehabilitation after a period of 18 months, but in most instances, expect it to take longer.
You cannot, before rehabilitation, enter into credit arrangements. However, if your vehicle instalments have been paid up to date, it is possible to negotiate for you to keep paying the vehicle instalments and thus to have use of it. The lawyers can also negotiate to have your furniture or vehicle bought from the insolvent estate at a reduced value. That being said, various factors must be considered, best discussed with our attorneys.
Your first step is to determine whether you qualify for sequestration. Let our attorneys assist you with information and legal guidance regarding how to apply for insolvency in South Africa.
Disclaimer: The article is for informative purposes only. It does not serve as legal advice nor is it intended as such. Please speak to our attorneys before relying solely on the information herein to make any decisions.