MEANING OF SEQUESTRATION TERMS AND CONDITIONS EXPLAINED
We briefly answer questions about sequestration, meaning of it and more below to help you gain a better understanding of bankruptcy proceedings in South Africa.
WHAT IS THE MEANING OF VOLUNTARY SEQUESTRATION?
It is a legal process whereby an insolvent natural person applies to be declared bankrupt. Certain requirements must be met before the High Court or a Magistrate’s Court will approve the voluntary sequestration, meaning the applicant must indeed be cash-flow and balance-sheet insolvent. The assets in the estate must be sufficient to ensure sale thereof on auction can bring enough funds to pay a minimum of 20 cents out of the rand to each creditor. The applicant can apply for voluntary sequestration without assets, provided the applicant is able to pay the minimum amount required. This includes the legal fees, court application and curator costs.
HOW MUCH DEBT CAN BE WRITTEN OFF THROUGH THE VOLUNTARY SEQUESTRATION PROCESS?
It depends on whether it is secured or unsecured debt and in which province the application is. In general, up to 80% of the applicant’s debt can be written off.
WHAT IS THE MEANING OF COMPULSORY SEQUESTRATION?
It is when one or more creditors apply to court to have the financial estate of a debtor surrendered and to have the insolvent party declared bankrupt.
IF I DON’T APPLY FOR REHABILITATION, HOW LONG DOES IT TAKE TO BE REHABILITATED?
Rehabilitation is automatic after a period of ten years, meaning you don’t have to apply to Court to be rehabilitated. However, it is a long time not to be able to manage your own financial estate. As such, it is recommended that you apply for rehabilitation as soon as the requirements are met.
CAN A FRIENDLY DIVORCE HELP TO PROTECT THE ASSETS OF MY SPOUSE DURING MY ESTATE’S SEQUESTRATION?
If you are married out of community of property, you have separate financial estates. However, a friendly divorce just before applying to be declared bankrupt won’t help. Your spouse still requires proof of ownership over the assets that you want to exclude from the proceedings. We recommend speaking to our attorneys about legal ways to protect the assets of your spouse or ex-spouse. Note that if you are married in community of property then you share one estate, meaning all the assets in the estate form part of the process.
WILL THEY TAKE MY FURNITURE?
No. The attorneys will negotiate with the curator for the buyback of the furniture from the estate at the low auction value, meaning the reserve price. The furniture is written up at your home, but not removed. You get to buy the items back. As such, you don’t have to be concerned about the possibility of ending up without beds and places to sit.
CAN THE TRUSTEE OR CURATOR ATTACH MY SALARY FOR PAYMENT OF BENEFITS TO CREDITORS?
Though the trustee or curator is within their right to do so, meaning they can – at their discretion – attach part of your salary not deemed necessary for the payment of normal monthly expenses, the attorneys normally negotiate to have the applicant’s salary excluded.
I AM A MUSICIAN AND AM AFRAID THAT MY MUSICAL INSTRUMENTS WILL FORM PART OF THE ESTATE, WHAT CAN I DO?
If you make a living from singing, song writing, composing, etc. then the music instruments are tools of trade. The trustee cannot attach the tools of trade, as you cannot be prevented from earning a living. If you are an artist, the same will apply to your art tools. If you are a computer technician, then the computer equipment will be tools of trade. As a plumber, the plumbing tools will offal under the definition: tools of trade.
WHAT IF THE ASSETS ARE REGISTERED IN MY CHILD’S NAME? CAN SUCH ASSETS BE ATTACHED?
If the assets have been paid in full, then the ownership lies with your child. The assets cannot be included in the insolvent estate.
WHAT SHOULD I SAY TO MY CREDITORS WHEN I APPLY FOR SEQUESTRATION?
You do not speak to them, other than informing them to speak to your attorney. Unfortunately, debt collectors often have call centre agents, not really familiar with the meaning of voluntary sequestration. To this end, simply email them a copy of the notification of your intention to voluntary sequestrate. Once the notice has been published in the Government Gazette and creditors notified, including SARS, they cannot take any further legal steps against you. They can also not demand payment.
WHAT IF I DON’T UNDERSTAND THE MEANING OF A PARTICULAR LEGAL TERM?
Our attorneys are here to provide the meaning of terms and explain the advantages and disadvantages of sequestration. They will help you through the entire process, ensuring you understand each step in the process.
Disclaimer: This article is for informational 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.