WHAT IS THE ROLE OF THE INSOLVENCY LAWYER REGARDING VOLUNTARY SEQUESTRATION IN SOUTH AFRICA?
Many South Africans are unable to pay their debts and are looking for debt solutions. One such a solution is voluntary sequestration, wherein an insolvency lawyer applies on behalf of the insolvent party to have the party declared bankrupt.
The party’s estate is surrendered and the assets sold on auction. A curator oversees the process and the proceeds of sale are used to ensure that each of the creditors receive at least 20 cents out of the rand for the debts owed to them. The sale of assets must also provide for sufficient funds to ensure that the legal and administration fees can be paid. The insolvency lawyer represents the insolvent party in court and the person does not have to testify in person. The insolvency lawyer also handles the entire application process, including the notices to be sent to the creditors, publication of the notice of intention to sequestrate, and drafting of the affidavit and the documents required stating the applicant’s income and expenditure, as well as list of creditors. The insolvent party thus has legal guidance throughout the voluntary sequestration process.
Part of the insolvency lawyer’s function is to help determine whether the party qualifies for sequestration. The applicant must be unable to pay their debts, their liabilities must exceed their assets, and they must have sufficient assets to ensure the sale thereof on auction can realise enough funds to pay for the sequestration process, estate administration by the curator, and the minimum benefits to the creditors. The insolvency lawyer also handles any further communication with the creditors. In addition, the insolvency lawyer may negotiate on behalf of the insolvent party to buy back the furniture from the insolvent estate at a reduced price. The furniture is still written up, but not removed from the insolvent party’s house.
Once the sequestration process is completed, the insolvency lawyer can, on behalf of the insolvent party, apply for rehabilitation of the applicant’s estate. Once awarded by court, the applicant can again enter into credit agreements without the permission of the curator and can hold the position of director in a company or certain professional and government positions, which cannot be held if under sequestration. The insolvency lawyer handles the application process and represents the party in court. The applicant does not have to appear in court.
WHEN IS IT TIME TO APPLY FOR VOLUNTARY SEQUESTRATION?
A party may want to call in the assistance of an insolvency lawyer to help them with the voluntary sequestration application if they:
- Struggle to pay their debt.
- Have substantial debt that would take years to be paid if they enter a debt review process.
- Face legal action from creditors because they cannot make payments on time.
- Face foreclosure on their property because their payments are overdue.
All legal action against the party stops once the notice of intention to sequestrate has been published and the creditors notified. The creditors must then communicate with the insolvency lawyer. All garnishee orders are cancelled and interest frozen. Once the sequestration is completed, no further claims can be brought against the insolvent party’s estate. The person is thus free to start afresh. A party can voluntarily sequestrate with movable or immovable property. It is best to discuss the two situations with an experienced insolvency lawyer. In both instances, the applicant must meet the requirements for insolvency and the sequestration must ensure that at least 20 cents out of the rand can be received by each of the creditors.
WHERE TO FIND AN INSOLVENCY LAWYER
Call on our team of experienced attorneys to assist in determining whether you meet the requirements for voluntary sequestration and to help you through 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.