Voluntary sequestration in South Africa is a legal process whereby you apply to court to be declared bankrupt. It enables you to regain control over your finances and to get rid of up to 80% of your debt in a short period. The creditors must at least receive 20 cents out of the rand and this means that you only have to pay 20% of your debt through the sale of assets in the surrendered estate. As such, it is not a debt holiday. The assets in your estate must be sold and the proceeds of the sale on auction must be sufficient to pay for the sequestration process and to ensure that the creditors receive the minimum benefit.

voluntary sequestration

It does make it possible for you to start afresh without garnishee orders against your name. No further legal action can be taken against you. If not all the debt is covered with the sale of assets, you will have to pay in the remainder, either in a lump sum or by agreement, through down payment. However, the interest rates are frozen and as such, no further interest can be added, making it possible to quickly pay off the debt in a more affordable manner. Once the debt is settled through voluntary sequestration in South Africa, you will have more money left to pay for living expenses and to rebuild your financial estate. This can then be done without the fear of constant harassment from creditors.

What about discretion?

Your employer will not be notified of your application for voluntary sequestration in South Africa. The process is handled discreetly.

What about furniture?

The furniture does not have to be removed from your home. It will be written up as part of the estate, but the insolvency attorneys can negotiate for you to buy it back from the insolvent estate at the reduced auction value. As such, you can keep your furniture.

What about children’s assets?

Your children’s assets are excluded from the surrendered estate and as such, are not written up or removed.

What about tools of trade?

If you use your computer to generate income, it is a tool of trade. Tools of trade are also excluded from the process. It is best to discuss the details regarding these with the insolvency attorneys.

What about vehicles?

If your vehicle is paid in full, it will form part of the process of voluntary sequestration in South Africa. It is an asset and will be sold on auction. However, if it is still under finance, it does not belong to you yet. The financier has the right to repossess the vehicle. It is possible to negotiate with the financial institution for down payment and the right to still drive the vehicle. The issue is also best discussed with the insolvency attorneys.

What happens if we are married within community of property?

You share one estate and both must apply for voluntary sequestration in South Africa. All shared assets thus become part of the surrendered estate.

What if we are married out of community of property?

You have different estates and as such, only your estate is surrendered. However, your spouse must be able to prove which assets belong to them and it is essential to take steps in protecting the assets of your spouse. If the solvent spouse signed surety for any of the debt you incurred, they will also be liable for the debt. The creditors can demand that the solvent spouse pay the shortfall on the debt after the assets have been sold on auction. You have legal ownership of the assets as insolvent party (in the estate) until your solvent spouse can prove ownership. If you are married out of community with accrual of property, the same requirements as for married out of community of property will apply.

Will my spouse be involved?

Yes. Though your spouse does not form part of your application for voluntary sequestration in South Africa, your spouse will also be served with sequestration documentation and will be listed as the second respondent.

Take the guesswork out of deciding whether to apply for voluntary sequestration in South Africa or not. Call on our team of insolvency lawyers to help you make an informed decision and to assist you throughout the process.

Note: 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 – April 2018.