How to Become Debt Free through Voluntary Sequestration

If you experience financial problems and have already taken steps to address them without success, and you want to know how to become debt free, you may want to consider voluntary sequestration. Once the process is completed, your financial problems will be something of the past. Instead of sitting with mounting debts, and having to juggle finances monthly to avoid foreclosure on your property and loss of your vehicles, you will be debt free. But, let’s take a look at how to become debt free through voluntary sequestration in South Africa by answering some of the questions you may have.

Can I undergo voluntary sequestration if I am married in community of property?

Yes, but because your spouse and you share an estate, all the assets forming part of the estate will be included in the voluntary sequestration.

What about my pension?

The law excludes claim payments received for personal injury and pensions. Your pension is safe.

Why is debt review not the answer to how to become debt free if I have extensive debt?

Debt review is suitable for individuals who have a monthly income, have more than R50 000 debt, and are able to pay off their debt within five years. If you owe money on your home and it will take you more than five years (with normal payments) to pay the loan, you will be under debt review for many years. If you want to get rid of all your debt within a short period and want to know how to become debt free, voluntary sequestration is a good way to deal with financial problems.

When do I not qualify for voluntary sequestration?

If you cannot pay the cost of voluntary sequestration, and don’t have enough assets in your estate to ensure its sale by the trustee can bring enough benefit to pay the creditors the minimum percentage prescribed, and if you don’t have an income, you will not qualify. In this instance, if your debt is under R50 000, you can apply for administration – or debt review, if the debt is more than R50 000.

Administration will be recommended as an alternative to how to become debt free if you don’t have a monthly income. Voluntary sequestration is a good alternative for dealing with financial problems if you have considerable debt, but have an income, immovable property, and assets to ensure sufficient benefit to the creditors. You may also not qualify for voluntary sequestration if the court finds that you can deal better with your financial problems following another approach – meaning you don’t have enough debt and are not really insolvent.

Life after sequestration –can I still open a bank account and have a cellphone contract?

Yes in both instances. Voluntary sequestration is an answer to how to become debt free. It is not meant to limit your ability to rent an abode, pay school fees, or use services such as a telephone or satellite television. All service contracts are excluded from the voluntary sequestration process. Banks are usually willing to have you open bank accounts, but may decline applications for current accounts. It is recommended that you open a bank account at a financial institution where you don’t owe money, so that the money will be safe from attachments.

How long will I still be able to drive my car if I use voluntary sequestration to become debt free?

You will have full use of the vehicle until the advertisement regarding the intention to sequestrate has been published in the Government Gazette. Once the notice is published, no creditor can take any further legal steps against you and must wait for the court order and the distribution of proceeds from the sale of the assets in your insolvent estate. However, creditors normally want to claim their assets as soon as you have been sequestrated, so you will have to return the vehicle just after sequestration. That said, the bank can approach the court for an order to release the vehicle to them for safe keeping before the sequestration is completed.

Are there other ways to become debt free?

Yes, you can sell your assets and pay off creditors. You can also apply for a consolidation loan to pay off your debt. However, the loan normally comes with hefty interest and can lead to even more financial problems. You can undergo debt review too, or you can call on our insolvency lawyers to assess your financial problems and suggest a suitable approach on how to become debt free again.

Disclaimer: Information is relevant on the date of publishing and is not intended as any form of legal advice. Please call on our attorneys for legal guidance rather than relying on the information herein to make decisions – September 2017.