VOLUNTARY SEQUESTRATION AS ONE OF THE BEST DEBT REHABILITATION SOLUTIONS
If you are looking for debt rehabilitation solutions, consider voluntary sequestration. Once your intention to sequestrate has been published in the required publications, you are protected against further legal actions from creditors. We briefly discuss various aspects of voluntary sequestration as one of the debt rehabilitation solutions available in South Africa, to help you make an informed decision.
When You Can Sequestrate
You can make use of sequestration as a debt rehabilitation solution if you have sufficient assets to ensure that the sale thereof at auction can provide for the minimum required benefit to the creditors according to the requirements of the Insolvency Act of South Africa. You can sequestrate with or without property. If you sequestrate without immovable property, you must have enough other assets to ensure minimum benefit to the creditors, or cash of at least 20% of the total debt owed. You must really be insolvent. The High Court of South Africa will not grant the voluntary sequestration order if you are still able to pay the debt. In addition, you will need an income. The assets must be sufficient to ensure that the legal process and the trustee fees can be paid.
WHY SEQUESTRATION IS ONE OF THE VIABLE DEBT REHABILITATION SOLUTIONS
No creditor can lodge a further claim against the estate. This means the debt that is included in the sequestration is all that must be paid. Once the creditors have received their benefits, they cannot ask for more money. The creditors must receive a minimum of 20 c out of the rand. This means that you will pay far less on the debt owed than would have been the case if you had entered into a restructuring agreement or signed admission of debt owed and payment thereof at a debt collection attorney. You will not have to pay the exorbitant interest normally associated with such credit agreements as mentioned above. You are debt-free within a relatively short time. You will have better cashflow and will not have to deal with the stress of creditors harassing you.
All debt up to the date of sequestration will be included in the sequestration process and will be something of the past once you have been sequestrated. That said, you will still have your service contracts, provided you keep on paying them. This means that your cellphone contracts will remain in place. Once you have been sequestrated, you can start afresh. With more cash available, you can rebuild your life. It is possible to arrange for buying back your furniture from the surrendered estate. The furniture will not be removed from your house. Your children’s assets are safe and so is your pension fund.
Negatives to Consider
As with all debt rehabilitation solutions, there are negatives to consider. One is that you cannot have a trust account, but you can still have a savings account. Another is that you cannot be a director of a company. You can also not hold certain professional positions. You will also lose some or all your assets.
Rehabilitation
While under sequestration, your credit record will reflect that you are sequestrated. You can still enter into credit agreements, provided you declare your sequestration status and have the written permission of the trustee or curator to enter into credit agreements. However, it is not recommended, because it can affect your ability to be rehabilitated as soon as possible. It also puts you at risk of not being able to service the debt. The idea is to become debt-free and as such, it is best to refrain from incurring more debt.
The general timeframe of rehabilitation is four years from the court order for sequestration. However, you can apply as soon as all creditors have been paid. You can also apply as soon as six months after date of sequestration if there are no creditor claims proven against your estate. You can also rehabilitate by paying off 50% of the debt. Certain requirements must be met before you can apply for rehabilitation. We recommend speaking to our attorneys about the timeframe and requirements for rehabilitation. You thus do not have to wait for years before you can be rehabilitated.
Voluntary sequestration is one of only a few truly viable debt rehabilitation solutions. Call on us to help you determine whether it is one of the possible debt rehabilitation solutions for your financial situation.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. You are advised to consult with us before using/relying on this information. Information is relevant to the date of publishing – February 2018.