GET FINANCIAL ADVICE FROM INSOLVENCY PRACTITIONERS BEFORE YOU TAKE STEPS
If you are in financial trouble, the first thing that may come to mind is to write to one or more creditors to explain the situation. Before you do so, get financial advice from insolvency practitioners. This is also true for entering into a debt counselling programme.
Even before you sell off one or more assets in the hopes of paying some creditors while the others have to wait, you will want to get financial advice from insolvency practitioners. Here is why: your actions can provide the creditors with sufficient reason to apply for your compulsory sequestration.
Although it may not at first seem problematic, the compulsory sequestration may cause you to lose more assets than needed. With voluntary sequestration, you get financial advice from insolvency practitioners to help minimise the effects of the sequestration and to ensure you can rehabilitate as soon as possible.
Some actions are deemed as acts of insolvency. We discuss the acts of insolvency below, giving you an idea of why it is important to get financial advice from insolvency practitioners.
ADMITTING IN WRITING THAT YOU ARE UNABLE TO PAY A DEBT
If a debt collector or creditor demands or requests that you admit guilt regarding a debt you owe, immediately get financial advice from insolvency practitioners. It is one of the most common acts of insolvency performed by debtors. The debtor wants to appease the creditors by showing that they do not want to run away from their responsibilities.
The debtor writes a letter to the creditors to explain that they cannot pay the debts at present and offers to pay less for now or asks to have the debt reduced. The debtor may, after creditor harassment, sign a document that states they admit to owing an amount and commit to paying it off together with collection costs, interests, and legal fees. The debtor then ends up with a larger debt than before or suddenly finds that the creditor brings legal action against them because they have admitted to not being able to pay the debt.
It is not impossible to negotiate with creditors, but before doing so, get financial advice from insolvency practitioners, as specific procedures should be followed.
ABSCONDING FROM DEBT RESPONSIBILITIES
Even if it is not your intention to run away from your debt responsibilities, by moving without notifying the creditors of your new address or leaving the country while you still owe money, it can be used as grounds for a compulsory sequestration application. However, the creditor must be able to prove that it has been your intention to abscond from the debt obligations. This can be rather difficult. Rather than risking legal action against you for doing so, get financial advice from insolvency practitioners regarding the correct procedures to follow.
NOT ENOUGH ASSETS FOR PAYING CREDITORS AFTER JUDGMENT
If a judgment has been granted against you, but you do not have enough assets that can be sold to pay the judgment amount, then any creditor can apply for your compulsory sequestration. Rather than waiting for it to happen, seek legal guidance on how to deal with a judgment situation and how to apply for voluntary sequestration.
REMOVAL OF ASSETS OR SELLING THEREOF WITH THE INTENTION TO PAY ONE CREDITOR AND NOT THE OTHERS
If you sell or remove assets to avoid the assets from being sold or attached, or to pay, for instance, the largest creditor without paying the other creditors, you benefit one creditor over the other. Removing assets can also be seen as an act of insolvency if done within six months before you apply for voluntary sequestration.
If you are not sequestrated, it is not an act of insolvency, but with it being a complex issue, seek legal help in this regard. For one, if you are not sequestrated, you can sell your assets even on the day that the court grants a warrant of execution. Removal does not only refer to hiding or taking assets away. It also includes transferring assets to, for instance, your child’s name to avoid the assets from being sold.
WHERE YOUR ACTIONS BENEFIT ONE CREDITOR WHILE DISADVANTAGING ANOTHER
Unlike with many of the actions discussed, the creditors do not have to prove your intent to benefit one creditor over another. Also be careful once you have published the notice of the intention to sequestrate. If a creditor contacts you and demands payment after the publication of the notice, you cannot make payment to the creditor. It is an immediate benefit to the creditor while it disadvantages the others.
FAILURE TO PROCEED WITH VOLUNTARY SEQUESTRATION AFTER YOU HAVE PUBLISHED THE INTENTION TO SEQUESTRATE
Do not act in haste. Even if you change your mind or you are now able to pay the debts, you cannot just decide not to proceed with the voluntary sequestration after the intention to surrender your estate has been published. Creditors can argue that you only published the notice to hinder them from taking legal action against you. You cannot use the surrendering of your estate application simply to stop the sale of execution.
Get advice from insolvency practitioners should your financial situation change after the notice has been published. If there is a possibility for the improvement of your financial situation within the next couple of weeks, rather get help in negotiating a settlement with creditors than risk being on the end of a compulsory sequestration.
ADVERTISING THE SALE OF YOUR BUSINESS, BUT NOT PAYING THE CREDITORS AFTERWARDS
Debt is an obligation. Voluntary sequestration helps you to get rid of up to 80% of the debt, but you have the responsibility to adhere to the correct procedures. Even in the case of a business being sold, you still have to pay creditors. Whenever you sell a business, you need to notify creditors by publishing a notice to the effect in a relevant newspaper. If, after the advert has been placed, you do not pay the creditors, they can take it that you are unable to pay the relevant debts. If you have published such a notice, make sure you pay the creditors. If you are not able to do so, seek legal guidance as to the correct procedures to follow.
OFFERING A SETTLEMENT AMOUNT TO CREDITORS
If you approach a creditor in writing and ask that the creditor releases you from the debt and state that you will pay a settlement amount, you perform an act of insolvency. If you want to negotiate with creditors for a settlement amount, do so with the help of experienced insolvency practitioners.
DO NOT KNOW WHAT TO DO NEXT?
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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.