HOW VOLUNTARY SEQUESTRATION WORKS IN SOUTH AFRICA
Working with experienced insolvency practitioners in South Africa is the first step towards becoming debt-free. Such legal practitioners know the laws pertaining to insolvency and can advise you regarding the best route to follow, also when it comes to rehabilitation after sequestration. As our experienced insolvency practitioners in South Africa will explain, it is important to understand the basic terms you will encounter when applying for sequestration. As such, we briefly explain some aspects of insolvency to help you gain a better understanding of what voluntary sequestration entails. For more in-depth information, we recommend speaking to our experienced team of insolvency practitioners, regardless of where you are located in South Africa
WHAT IT MEANS TO BE INSOLVENT
If a natural person is insolvent, their liabilities exceed their assets and they are unable to pay their debts. A business is insolvent when its liabilities exceed its assets. By law, the business must be liquidated if this is the case and it is unable to pay its creditors. With a natural person, sequestration is not compulsory, but worth considering if the debt is substantial.
Requirements for Sequestration
A natural person applies to Court to be declared bankrupt. Voluntary sequestration is a legal process, best handled by experienced insolvency practitioners in South Africa. The attorneys help the individual determine if they meet the requirements for voluntary sequestration. For one, the individual must be able to prove that their debts are more than their assets. They must have sufficient assets to ensure that the sale thereof on auction can realise enough benefit for the creditors, pay the legal costs, and pay for the costs of sequestration.
How the Process Works
The experienced insolvency practitioners apply to the relevant High Court in South Africa to have the individual’s estate surrendered. The attorneys draft the required documents and publish the notice of intention to sequestrate. They also submit the notice to the Master of the High Court. The Court orders a provisional sequestration. Once the creditors are notified of the intention to sequestrate, they can no longer take legal action against the individual. They have one month in which to submit their objections. If the Court does not receive any objections by the return date to Court, it grants the final sequestration order.
The Court appoints a curator who oversees the sale of assets in the estate and ensures that the minimum benefits are paid to the creditors. The curator manages the individual’s estate until they are financially rehabilitated. During this period, the individual must get permission from the curator to enter into credit agreements. They cannot hold membership of certain professional bodies or be a director of a company. Their ITC record reflects their sequestrated status.
Any outstanding debt after the creditors have received their minimum benefits is written off. The individual can thus get rid of their debt in a short period. No garnishee orders can be attached to their salary. Their children’s assets, their pension, and tools of trade are safe. It is, however, important to understand that, should the individual be married within community of property, all the assets in the marriage form part of the sequestration process. Since the couple shares one estate, all the couple’s assets are included in the estate.
Once the curator has submitted the final distribution account to the Master of the Court, the individual can, with the help of experienced insolvency practitioners in South Africa, apply for financial rehabilitation. It is also a legal process. The attorneys handle the entire process and the individual does not have to appear in court. A person can apply directly for sequestration or have experienced insolvency practitioners in South Africa represent them. Where a couple is married within community of property, both must apply for sequestration at the same time. Partners in a partnership may apply or have experienced insolvency practitioners represent them in their application for sequestration. The executor of a deceased estate may apply for sequestration of the estate. An insolvent trust can also apply for voluntary sequestration. Lastly, a curator of an individual’s estate may apply for sequestration of the estate.
Become informed. Seek legal advice from experienced insolvency practitioners in South Africa on how to apply for voluntary sequestration.
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 – March 2018.