Why is insolvency the best way forward when you’re struggling financially? It’s true that anyone who goes through financial difficulties struggles to find a way out of debt. Often, the monthly income is insufficient to cover the debt, and even with solutions such as debt review, the monthly installments prove to be too high compared to your monthly income.
What is the emotional price you pay for your over-indebtedness?
People facing financial hardship, experience profound feelings of hopelessness and depression, which can often lead to thoughts of suicide. The situation is really frightening to be in. As a human being, you naturally aspire to attain the same quality of living as your friends and peers. Often, you may feel ashamed and disappointed in yourself for not being able to do this. For finding yourself in this financial situation.
Is it your fault that you’re over-indebted?
No, in all honesty I belief it’s society’s fault. The pressure to fit in is real, and it doesn’t just rear its head during your school days but follows you like a shadow throughout your entire life. When you’re sitting pretty with a cushy job and fat pay cheque, it’s only fitting to have a nice car and home in a good neighbourhood. Never mind the expectations of how you should dress, talk, and present yourself. You must go the whole nine yards to prove to your peers that you belong, or at least try to belong.
This happens more often than you think and you’re not alone. Most likely, some of your friends are experiencing the same financial difficulties as you are, but you’re both too ashamed to talk about them. Therefore, you would rather face financial difficulties than endure the embarrassment of others discovering your financial situation. In July 2022 a poll taken by News 24 indicated that as much as 90% of respondents that took part in the poll is struggling financially.
Making these statements doesn’t mean that you need to tell the whole world about your financial situation, it means that you’re not alone. Even though you feel alone.
One thing that is important to remember is that every person lives according to their income. Whether you’re a high-income or a low-income earner, the same principles apply.
For instance, if you earn R80 000.00 per month you’re going to drive a nice car, live in a nice house and have a few credit cards, an overdraft and maybe even a few clothing accounts at a high-end clothing store. Why? Because you can afford it.
However, if any unforeseen circumstances arise that drain your monthly income, you’ll have to decide which is more important to pay. The unforeseen circumstances or your monthly obligations.
We have many clients that go through the same self-loathing process but it’s never their fault. It’s just life, life happened.
There can be many different reasons why this happened to you, for instance:
1. It can be that you lost your job, or
2. That you were placed on early retirement and did not anticipate it.
3. It can be that there was an illness, etc.
Are you sure you want to spend the rest of your life paying for these mistakes? Or do you want to get out from under your debt and get back on your feet as soon as possible?
When someone is having financial challenges, what is the first thing they do to try to fix their problem?
There’re many possible scenarios that play out when you find yourself in this situation, but it all looks approximately like this:
1. Try to get a consolidation loan to settle all the debt and pay only one monthly installment.
2. Get a loan to settle the unforeseen expenses and rather repay it in smaller monthly instalments.
3. Try to borrow from family and friends to finance the unforeseen expenses.
4. Max out all the possible credit facilities that are available to him, whether it’s his credit card, overdraft, or both, or whether it’s a loan that can be extended.
However, this is not a solution, even though it seems like it. By doing this, you will only exacerbate your existing financial predicament. You can’t rob Peter to pay Paul. This basically means that you cannot settle debt with debt. In reality, the debt increased rather than decreased, and by doing so, you made your financial situation worse.
Therefore, robbing Peter to pay Paul is not a solution, but if this is not a solution, what is?
There is a solution. The most obvious solution is to declare insolvency. This is the ultimate solution to your over-indebtedness.
While it is true that if you have immovable property and most probably a vehicle that is financed, you will lose those things in a sequestration application, It can be replaced.
You will get rid of the debt in one go and start experiencing the financial relief immediately. It doesn’t cost you an arm and a leg, and the costs can be paid off in easy to manage monthly instalments. You stop paying your debts all together, the moment you start with the sequestration process.
You have nothing to lose, only your debt.
Do you really want to drive that same vehicle without upgrading it until the day you die?
If the answer is yes, then by all means don’t choose insolvency as a solution to your over-indebtedness.
How to make the decision: Is Insolvency the best way to get rid of my debt?
Questions you need to ask yourself is:
1. If I’m doing the calculation of my total debt in comparison with my current monthly income and living expenses, what are the chances of me being able to settle the debts within the next five years
2. Do I want to pay the price for over-indebtedness for the rest of my life, or;
3. Do I want to suffer the so-called humiliation of insolvency now and be debt free immediately?
What do I have to lose by following the insolvency route?
1. Debt, gone for now and forever, unless you choose to make debt after rehabilitation again.
2. Credit score, but not forever, only for a little while.
3. House, if you’re not renting, but you’ll be able to buy a new house in no time
4. Car, if it is on an installment sale agreement, but only until you’re rehabilitated, then you can buy your fancy car again.
How will I get to work without a vehicle?
You have the option to either purchase a vehicle on a rent-to-own basis or arrange for a trusted family member or friend to re-finance your vehicle in their name. This way, you can continue to use the vehicle while making monthly installment payments to them. If the vehicle is on a lease agreement, you will not lose it and will be able to keep it, just as long as you continue servicing the monthly obligation towards the lease agreement.
When will I lose my vehicle?
The bank will either repossess your vehicles through a court order, or the curator will notify you when the bank seizes and removes the vehicles.
To keep the vehicles safe while going through the insolvency process, DO NOT leave it with any attorney or company. This is strictly prohibited.
You should only drop the vehicle off at the law firm or company handling your sequestration application once you have a date and time for its seizure and removal. Check in with them to confirm the vehicle’s removal.
How will I find a home to rent, if my credit score is adversely affected. Should I decide that Insolvency is the best way to get rid of the debt?
An estate agent will allow you to rent a property from them if you can provide them with a larger deposit than the standard amount, such as a three-month deposit instead of a two-month one.
When do I need to vacate my house if I decide that voluntary sequestration is the best way to get rid of the debt?
You’ll be able to stay in the home without servicing the bond monthly until the property is sold. However, you must save the funds you would have spent on the bond, to secure a rental property when the time comes for you to vacate the premises.
Notice to vacate the property
Remember that once the property sells, you will likely receive a one-month notice to move, and if you don’t prepare, you won’t have enough time to gather the necessary funds for a deposit, rent, and moving to a new location.
What about my furniture and other movables?
You will not lose your furniture, and if you have any vehicles that’ve been paid for in full, you will not lose those vehicles either. You will be afforded the opportunity to buy it back from the insolvent estate once the curator’s appointment after the sequestration has been granted. No movable assets will be removed from your premises at any time, unless you opt for the curator to sell the movable assets on auction rather than buy them back from the insolvent estate.
VERY IMPORTANT TO REMEMBER!!!
Under no circumstances should you pay the monies owed to purchase the movables from the insolvent estate into any business or trust bank account, even if it’s an attorney’s trust account. Only once the Master of the High Court’s appointment of the Curator, which occurs after the application’s grant, authorises the payment of these monies into the Insolvent Estate account. You’re only allowed to pay for the application fees for the sequestration prior to the application being granted.
Ok, I agree, Insolvency is the best way to rid myself of the debt, but when will I be able to too clear my name and replace my house and car that I lost?
As soon as six months from date of sequestration up to 3-5 years from date of sequestration, depending on what happens on the insolvent estate. Please contact one of our insolvency lawyers and/or professional consultants to explain these processes to you if you need more information herein.
Taking all the above into consideration: How do you feel about your current financial situation? Are you ready to break free from the burden of debt and embrace a future filled with financial freedom? Imagine the satisfaction of owning a new house and car, as well as the confidence that comes with knowing you’ve taken the most effective path to eliminate your debt and restore your good name in the shortest period possible.
Get valuable guidance from our insolvency attorneys on how to apply for bankruptcy and understand the impact of sequestration on your financial situation.
At Insolvency Care, you get a Free Assessment and Free consultation from one of our Insolvency Law Experts and find out if you qualify for this remedy as provided for in the Insolvency Act of South Africa.
Contact Insolvency Care today – Get rid of that debt – Regain your Financial Freedom!
Disclaimer: The article is for informative purposes only. It does not serve as legal advice, nor is it intended as such. Please speak to our attorneys before relying solely on the information herein to make any decisions.