Learn How to Become Debt-Free Through Voluntary Sequestration

Do you want to know how to become debt-free? In South Africa, the answer is often voluntary sequestration. Though you may think of sequestration as just a means to lose all your assets, the truth is that the only way to become debt-free is to pay off your debt and not to make any more debt. It sounds obvious, but here’s why voluntary sequestration may be the solution if you want to become debt-free.

Instead of having to sign a credit repayment or rescheduling agreement with your creditors in which they write off part of the debt and you still need to pay the rest at a high interest rate, you can apply for voluntary sequestration where the creditors must receive a certain percentage of what is owed to them. This means you will pay far less than you would have paid if you had repayment agreements with them at a high interest rate. The remainder of the debt is payable over a short period at no extra interest.

More often than not, people stay in debt simply because of the very high interest rates associated with the credit. You may also be one of those people and if you don’t take action, you may end up losing everything. You may lose your residential property too, if you cannot pay your monthly mortgage and the bank threatens with foreclosure. You will lose the property, but you will still owe the bank the remainder if they cannot get the full amount owed from the sale of the property. You will thus be without your house and still in debt!

With voluntary sequestration, your home becomes part of the insolvent estate. It is sold at auction and the proceeds paid towards your creditors. Keep in mind that creditors with security (such as the bank, regarding your home), are the priority creditors. The creditors without security, such as clothing stores, have secondary priority. Your employees have priority claims and so does SARS. Our attorneys will explain how the proceeds are divided among the creditors to ensure fairness.

Once all the creditors have received their benefits from the sale of the assets in the insolvent estate, you will need to settle the remainder, which is normally around 20% of the amount. How can this be done? Via payment of a cash amount or by agreement through down payments over a short period. The good news is that you can pay off the remainder quickly and become debt-free in short order, because there isn’t any extra interest on this debt.

As soon as the claims against the estate have been settled you can apply for rehabilitation of your financial status. Once you are rehabilitated and have become debt-free, the status of “insolvent” is removed from your credit record and replaced with “rehabilitated”. You will again be able to become a director of a company, enter into credit agreements without permission from the curator, and you will have full control over your financial affairs – without debt.

We’ve briefly explained how to become debt-free through sequestration. Let our team of attorneys now provide you with expert advice and assistance regarding the process.

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.