Before you consider debt solutions, seek the advice of experienced insolvency practitioners who will help to take guesswork out of the picture. It is your financial future, and therefore it is crucial to seek legal and financial advice from experienced insolvency practitioners, rather than trying to approach creditors with an offer on your own.

Indeed, admitting in writing that you are unable to pay your debts is an act of insolvency, which gives creditors the right to apply for compulsory sequestration of your estate. Rather than being on the defence, take the necessary proactive steps to deal with your debt. Follow the insolvency practitioner’s advice on how to proceed, and do not attempt to take shortcuts or hide assets.

Below is basic information about what happens to some of the assets when you are declared insolvent. We do, however, recommend seeking insolvency practitioners’ advice on each aspect, as every situation is unique and requires analysis to determine the best route to follow.

Assets of The Business

Liquidation is the term that is used to describe the legal process where a company applies to be declared bankrupt. Unlike with an individual, where it is preferable to have assets when applying for voluntary sequestration, a business does not need any assets to apply for voluntary liquidation.

If the liabilities of the business exceed the assets, and the business is unable to pay its debts, it is insolvent and not allowed to keep on trading. Where the business entity owns assets, they form part of the liquidation process, with the exclusion of the assets that have been acquired through an instalment sale agreement. These assets are returned to the creditor or lending institution.

Assets of The Individual 

When it comes to the individual’s insolvency, the term used is “sequestration”. A voluntary sequestration is the legal process whereby an individual applies to be declared bankrupt. The individual’s estate is surrendered. A trustee is then appointed by the court to oversee the sale of the assets in the estate, and to ensure fair distribution of the proceeds of sale among the creditors.

When it comes to an individual’s estate, it is best to apply for voluntary sequestration with immovable property as part of the estate. It is possible to apply for voluntary sequestration without immovable property, provided the individual is able to pay the total of 20 cents out of the rand, in cash, to the creditors, or at least has sufficient assets to ensure the sale thereof provides sufficient funds to ensure a minimum benefit can be paid to the creditors.

It is best to seek insolvency practitioners’ advice about the above to reduce the risk of misunderstandings regarding what is included or excluded from the estate. Keep in mind that the individual must also be able to pay the cost of sequestration if the person does not have immovable property. In either case, the voluntary sequestration will only be awarded if the total cost of sequestration can be covered and the minimum benefit for each creditor realised.

If you are an individual, you will want to know which assets are included or excluded from the surrendered estate. We recommend seeking advice from our insolvency practitioners regarding assets that are included.

What Happens to Your Vehicle?

If the vehicle is paid in full, then it forms part of the estate. If not, it belongs to the creditor, and is returned to them, since the instalment sale agreement is suspended with the voluntary sequestration.

What Happens to Property Attached by a Sherriff of the Court?

All attached assets will form part of the estate, as the sequestration order takes precedence.

Avoid confusion about the assets that are included or excluded from the insolvent estate. Seek guidance from our team of experienced insolvency practitioners.

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.