Voluntary sequestration is an expensive legal procedure in which you apply to court to be declared bankrupt. You might wonder if there are any advantages to voluntary sequestration. The good news is that just as there are disadvantages to any debt solution, there are also advantages.

Below are a few of the advantages of voluntary sequestration, which can help you to make an informed decision regarding your financial future.

  1. Debts are Written Off

You become debt-free, which is one of the most important advantages of voluntary sequestration. With most other debt solutions, you must still pay interest on the outstanding debt, even if you negotiated for lower interest. You thus remain in debt until all the debt is paid off.

With voluntary sequestration, your assets are sold on auction, and the proceeds of the sale are used to ensure the minimum benefit is paid to the creditors. One of the advantages is that the sale of the assets must realise at least 20 cents out of the rand for the debt owed. This means that you can have 80 cents out of the rand paid off immediately. All debt included in the voluntary sequestration is paid and written off. This means that you become completely debt-free without having to be concerned about monthly instalments over years.

  1. You Can Still Stay in Your House for a Period

A common misconception is that you have to move out of your house immediately. One of the advantages of voluntary sequestration is that you can stay in your house between three and six months from when the application commences to the date that you have to move out. Though it may not sound like an advantage, consider the fact that you do not have to pay the bond during this time. This means that you stay for free without having to pay the bank, and can thus save up to ensure you have two months’ deposit and at least three months’ rent for a home.

  1. No Need to Pay Creditors Once the Application Has Been Published

As soon as the provisional application is made, and your intention to voluntary sequestrate published, you seize all payments to creditors. Indeed, the law prohibits you from making any further payments to the creditors. The interest on the debt is frozen, and the creditors cannot add more interest. As such, you have a slight payment holiday. Because of this, you have at least two months’ payments, which would have gone to the creditors, to use to pay off any remainder on the balance after sequestration.

  1. Your Salary is Not Attached

Another one of the advantages of voluntary sequestration, which should not be ignored, is the fact that all garnishee orders on your salary are cancelled. Creditors cannot attach your salary, and your income is yours. However, it is possible for the trustee to attach part of your salary for debt payment. We can discuss such circumstances with you and explain how the process works.

  1. You Do Not Have to Lose Your Furniture or Pension

Your pension, tools of trade, and your children’s assets are protected. Paid up furniture forms part of the insolvent estate, but because furniture is hardly valuable enough, to ensure that the minimum benefit can be realised through the sale thereof, it is possible to negotiate to buy the furniture back at the low auction-value price. The furniture is written up, but not removed from your property.

  1. No Court Appearance Needed

Though the court may, at its discretion, require you to appear in person, it is highly unlikely. The insolvency attorneys handle the court application on your behalf and take most of the burden away from you.

  1. No Need to Deal With Creditors in Person

Another one of the advantages of voluntary sequestration is that once the application commences, you can refer all your creditors to your attorney. Indeed, they know that you are not allowed to make any payments to them. You can sleep peacefully knowing that the attorneys handle all communication with creditors.

We recommend seeking legal guidance regarding the advantages and disadvantages of voluntary sequestration in South Africa to ensure you understand what the process entails.

Disclaimer: This article is for informational purposes only and does not constitute legal advice. Call our attorneys for legal advice, rather than relying on the information herein to make any decisions. The information is relevant to the date of publishing.