It is possible to avoid bankruptcy in South Africa, even if you have excessive debt, do not have enough assets, and experience difficulty in paying debts when due. We briefly look at ways to avoid bankruptcy before and after the mentioned scenario.


Set up a monthly budget for the basic living expenses. Cut on all luxuries, such as entertainment, sweets, outings, and service contracts, including television subscriptions. If you have cell phone contracts, check to see if you do not qualify for an upgrade. If you do, rather than upgrading to a more expensive contract, choose the very basic contract without a new handset. You can save anything from R100 to R2 000 per month by only choosing a basic data and voice SIM card option. You can also cancel contracts if you are already at the end of the contract period instead of renewing or upgrading.

If you owe R2000 or less on a store account, use the money from saving on luxuries to pay off the account completely and close it. Every store account that is still open attracts administrative costs and creates temptation to use the credit.

Join a commute club instead of driving your vehicle to work. This will help you save on fuel and reduce wear and tear on the vehicle.

Pay up insurance policies where possible and stop such where not needed immediately. Downgrade your medical aid to a hospital plan if possible. If your children are in a private school or college, consider moving them to a good Model C school. Cancel subscriptions to magazines, clubs, and newspapers. Use the money saved to pay off credit cards and any debts with high interest rates. Be sure to pay the minimum amount on each debt on time and use the extra money to pay off high interest debts.


If you qualify for a debt consolidation loan and it is enough to pay off all the debts, you can always use it as a way to avoid bankruptcy. Close all credit accounts thereafter to prevent you from making more debt. Still apply the principle of cutting costs until you have paid off the debt consolidation loan.


You can apply for debt counselling as a way to avoid bankruptcy. Note that it is not a guarantee that creditors will not bring judgements against you for debt owed. However, if the application is successful, you can avoid bankruptcy by paying the consolidated monthly instalment.

Once the debts have been paid in full, you receive a debt clearance certificate. Some debts cannot be included in the debt review process. These include service contracts, vehicle hire, or a lease with balloon payment structuring at the end of the lease period, and rent. Make sure you can still pay for such when under debt review. If you miss one payment or make a late payment, the creditors can take immediate steps for judgement in collecting the full amounts plus interest owed. You must have a monthly income to qualify for debt review.

Part of the monthly instalment goes towards payment of the debt counselling and another part for the payment of the distribution agency.

You can also avoid bankruptcy through the administration process. Note that this process can mean being in debt for many years. You have legal costs to pay and interest may not be favourable. Just as with debt review, you cannot enter credit agreements. Administration is the option for when your debt is less than R50 000. An administrator is appointed to manage the payment of money to the creditors. You pay the monthly amount to the administrator for distribution. You must also pay the administrator costs. Once all costs, interests, and debts have been paid, you receive a clearance certificate.


The Insolvency Act makes provision for common-law and statutory compositions. This can be a way to avoid bankruptcy proceedings if your estate has been provisionally sequestrated. With composition, you can enter a compromise with the creditors through a compromise agreement. Only once the creditors approve can the agreement be binding. Where your estate has been sequestrated, you can enter a statutory compromise to avoid the liquidation process. We recommend speaking to our attorneys about the details for this process.

If it has not been possible to avoid bankruptcy, give us a call to help you with voluntary sequestration or to avoid bankruptcy proceedings to conclude even after the sequestration order has been given.

Disclaimer: This article is for information purposes only and does not constitute legal advice. Call on our attorneys rather than relying on the information herein to make any decisions. The information is relevant to the date of publishing.