REQUIREMENTS AND PROCEDURES FOR A SEQUESTRATION APPLICATION
The first step towards becoming free of debt is to determine if you meet the requirements for a sequestration application in South Africa. To this end, we briefly look at the requirements.
INSOLVENCY REQUIREMENTS
For a voluntary sequestration application to be successful, you must be insolvent. This means your liabilities must exceed your assets. You must be unable to pay debts when due. As such, a mere cash-flow problem does not mean you qualify to be declared bankrupt. If the cash-flow problem can be solved with the selling of assets or a debt consolidation loan, then it most probably is better to address the debt issues in this way.
If you struggle to make monthly debt payments and cannot pay living expenses, even after having cut back on costs, then you qualify. However, you must have sufficient assets in your estate to ensure the sale of the assets on auction can provide for enough funds to pay the minimum of 20 cents out of the rand to the creditors. In addition, the sale of the assets must provide for sufficient funds to pay the sequestration application and trustee costs.
The process entails an application to court to be declared bankrupt. As such, it is an expensive process. If your debts are below R50 000, then it may not be the best way forward. If, however, you have a bond on your immovable property and the bank threatens to foreclose on the property, then you can consider voluntary sequestration.
WHAT DOES THE PROCESS ENTAIL?
The first step is to determine whether you meet the requirements to be declared bankrupt. To this end, draft a list of all creditors, their contact information, total amount due to each, and the monthly amounts due. Also, list all your living expenses. Make a list of your assets and estimated value. Our attorneys will help to determine true value. Get in touch with our attorneys to help assess your financial status. If you qualify, they will explain the sequestration application process, costs, timeframe, and legal effects. They will also explain which documents are required and assist you in drafting the statement of affairs. They will publish the notice of intention to sequestrate, handle the court application process, and communicate with the creditors.
WHAT ABOUT CREDITOR PAYMENTS?
Once the notice of your intention to sequestrate has been published, you are protected from further legal action by any of the creditors. By law, you cannot make any payments to the creditors. This means you must immediately stop all credit payments. You do not need to negotiate with the creditors, and can simply refer them to our attorneys if they still harass you. All interest on the debt is frozen. This means there will not be additional interest payable for the period that you are unallowed to make payments to the creditors.
STEPS IN THE SEQUESTRATION PROCESS
Once you decide to proceed with the application, we publish a notice to the effect in the Government Gazette and notify the creditors. Our attorneys draft the necessary court documents for your signature and make sure all legal formalities are met. The legal team represents you in court, and you do not have to attend in person. If the court grants the sequestration order, a trustee is appointed to oversee the estate. You meet with the trustee and the creditors. The assets are written up and an auction follows. All proceeds of sale are used towards payment of creditor benefits, legal costs, and the trustee administration fee. Once the requirements are met, you can apply for rehabilitation. Once rehabilitated, you have full control over your estate again.
IMPORTANT ASPECTS DURING THE PROCESS
It is imperative to list all creditors who can have claims against your estate. It is also important to list all your assets. Do not hide or sell any assets to avoid such forming part of the estate. Rather consult with our attorneys, as you can, for instance, keep your furniture. Our attorneys negotiate the buyback of the furniture from the insolvent estate at the low auction value. You also keep your tools of trade, salary, or pension money. You keep any personal injury claim money, and your firearm can also be bought back from the estate. You will have enough time to find a new home. The process takes around six months.
Get in touch for professional help with your sequestration application in South Africa.
Disclaimer: This article is for information 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 as at the date of publishing.