If you are considering voluntary sequestration, you need to make sure that you are able to meet the requirements for the application. We briefly discuss the voluntary sequestration requirements below, which should help you to decide whether to follow the sequestration route to become debt-free.

Your Debt is More Than Your Assets

The first requirement is that you must indeed be insolvent. This means your debt must far-exceed the value of your assets. However, when you buy a house, the chances are that your debt exceeds your assets since you may also have other debts. It does not mean you are insolvent. To be insolvent, your liabilities must also far-exceed your income. As such, you must be unable to pay your creditors and still pay for the basic living expenses.

Sufficient Assets to Ensure Minimum Benefit

Another one of the voluntary sequestration requirements is that you must have sufficient assets to ensure that the sale thereof by the court-appointed trustee can realise enough benefit for the creditors. The sequestration must thus still benefit the creditors.

The minimum benefit means that the creditors must receive at least 20 cents out of the rand for the debt owed. Keep in mind that there are creditors with security for the debt and those without. In addition, certain creditors get priority, such as SARS, employees, and creditors with security for the debt. As such, it is best to discuss the minimum benefit requirements with our attorneys, as it is dependent on various factors.

Sufficient Funds to Pay for the Voluntary Sequestration

The sale of your assets must also realise sufficient funds to ensure that the cost of voluntary sequestration can be covered, which includes the court application, legal fees, and trustee fees. If the requirement cannot be met, then the court will not approve the application for voluntary sequestration.

Other Important Factors to Consider

The above are the important voluntary sequestration requirements to meet. Keep in mind that you need to have an income to ensure that you can pay the remainder, or at least have a lump sum to do such. If you are married in community of property, both spouses apply for voluntary sequestration, and your combined estate must meet the voluntary sequestration requirements. If you are married out of community of property, the assets of your spouse are included in the process. Your spouse must prove which assets belong to them, but our insolvency attorneys can assist with this.

Your salary is safe, as all existing garnishee orders are cancelled. The trustee can attach a portion of your salary to pay off the remainder, but in most instances, your salary is yours. Your pension is protected, as well as income from a personal injury claim. However, inheritance received before or during the sequestration forms part of the surrendered estate.

Paid up furniture forms part of the estate, but since the value of furniture is hardly enough to ensure that the sale thereof can realise a sufficient minimum benefit to the creditors, the trustee is often willing to have it written up, but not removed from your home. You then have the opportunity to buy the furniture back from the insolvent estate at the low auction value.

Paid up vehicles also form part of the estate, along with your immovable property. Vehicles bought through instalment agreements are repossessed by the bank, as they still belong to the bank. Your tools of trade are excluded from the estate, and your employer is not notified of your sequestration. Though the court may require you to do so, it is unlikely that you will need to appear in court.

From the date that the application commences, until the final order is given for voluntary sequestration, takes about two months. All the debts that form part of the sequestration are paid, and the remainder is written off. This means you are debt-free and able to start fresh.

If you do not have immovable property, you must have sufficient assets to ensure the sale thereof can realise enough benefit for the creditors, according to the voluntary sequestration requirements. If your debt is small enough to pay off in five years through an alternative debt solution, it will be better to opt for voluntary distribution, debt consolidation, or debt review. However, if you owe a substantial amount, and meet the requirements for voluntary sequestration, it is the route to follow if you want to become debt-free within a relatively short period.

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.