CAN YOU BENEFIT FROM BANKRUPTCY?
Most people who are filing for bankruptcy, do so to stop creditors from harassing them, and because they simply see no other way out. Few stop to think of advantages associated with bankruptcy.
Considering that one’s credit record reflects your sequestration status and you lose your immovable property in the process, you might think that people must be crazy to voluntary sequestrate. However, there are advantages to bankruptcy to consider, and if you work with experienced insolvency attorneys, you can avoid pitfalls and costly mistakes in dealing with your debt situation.
STAY AGAINST CREDITORS
Once the notice of your intention to file for bankruptcy is published, there is an automatic stay against all creditors. This means all debt collection actions against you must stop. It does not mean your debt problem goes away, but all creditors must wait for the outcome of the court hearing before they can take action. If you qualify for voluntary sequestration and the court awards the bankruptcy, the creditors still cannot take action against you. Your estate is surrendered, and the trustee oversees sale of assets and distribution of proceeds to the benefit of creditors.
During the period from the date of notification of the intention to sequestrate up to when the creditors receive their benefits, all letters and calls from debt collectors stop. All garnishee orders on your salary are cancelled. Even your home foreclosure stops and no repossessions can take place by any of the creditors.
The creditors are treated as a collective, and as such, they must patiently wait for their benefits according to their priority status. They can, however, repossess vehicles once you are declared bankrupt, and can also do so with your cell phones if you are behind in payments. What the stay does not stop is tax audits and criminal proceedings against you.
INTEREST FROZEN
If you sign an admission of guilt letter stating that you will pay off the amount owed plus interest and legal fees, as the result of negotiation with a creditor, you can expect high interest rates. Somehow, you end up paying far more than originally owed. Then you still have to pay all the other creditors as well. Your credit record is in shambles, and you hardly make it through the month.
But if you declare bankruptcy, up to 80% of the debt is written off through the sequestration since you only need to pay 20-22 cents out of the rand, and in some instances, 10 cents or 50 cents out of the rand (depending on factors best discussed with our attorneys) to each creditor. This is overseen and managed by the trustee of your surrendered estate. You thus get rid of a large chunk of debt in one go. If there is a shortfall, then you pay it in a lump sum or through down payment at no added interest.
COMPLETELY DEBT FREE
All your debt is gone once the sequestration is complete. This means you have zero debt, and can use all your income to start over.
If it feels like you are drowning in debt, and you do have immovable property, call on our legal team to help you become debt-free by means of voluntary sequestration.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Call on 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.