You may have read about insolvency, sequestration, and financial rehabilitation on the internet. Although you may also know what sequestration is, you might not have received an answer on “what is financial rehabilitation?” We take a brief look below at what it means as related to voluntary sequestration to help answer the question.

Sequestration Is Not Forever

Understandably, you will not want to voluntary sequestrate if it means that you will not be able to enter into credit agreements without the permission of your estate trustee, and will not be able to act as a director of a company for an unlimited period.

Fortunately, financial rehabilitation can be done after a specific period. It simply entails an application to court to have the status of sequestrated removed. Once done, you are financially rehabilitated, and will not need the permission of a curator to enter into credit agreements, you can be a director of a company, and once again have full control over your financial estate.

Why Sequestration?

Voluntary sequestration enables you to get rid of up to 80% of your debt at once, with the remainder payable in cash or by agreement over a specific period. Within a relatively short period, you can be debt-free with no further claims on your post-sequestrated estate. It gives you a chance to start over without debt. However, it also means that the court will appoint a curator to manage the distribution of benefits to the creditors, and the status of insolvent or bankrupt is noted on your credit record.

After Rehabilitation

Once you have been financially rehabilitated, the insolvency attorney also checks the ITC records for any judgment notices on your name. Such notices must be removed and you thus get a clean credit record. However, the status of financially rehabilitated stays on your credit record for a period of five years, whereafter it is automatically removed.

What If You Don’t Apply for Rehabilitation?

If you don’t apply for financial rehabilitation, you will remain under sequestration for a period of ten years, whereafter you will be financially rehabilitated without having to apply to court for such. However, considering that the idea behind voluntary sequestration is to get rid of your debt and to get a clean slate, it is recommended to apply for rehabilitation as soon as possible.

What to Avoid

To ensure that your application is not jeopardised, it is essential to manage your financial affairs with care. Don’t enter into any credit agreements without prior written permission from your estate curator. If possible, avoid all debt while under sequestration. Also, be truthful about your assets, debt and finances with the court and curator, as fraud in this regard will hinder your ability to become financially rehabilitated within the shortest possible period of time.

You can normally apply for rehabilitation four years after the sequestration date. Do note that specific requirements must be met – these are best discussed with our insolvency attorneys.

Disclaimer: The information in this article is for information purposes only and not intended as legal advice. We strongly recommend that you seek professional legal advice before solely relying on the information herein. The information supplied is relevant to the date of publishing – August 2017.