Frequently asked questions
I want to sequestrate but own a property. What do I do?
A. Unfortunately, you will not be able to retain your property if you undergo sequestration. In many cases clients use the equity that has accumulated on the property value to cover the costs and the creditors benefit required for sequestration. Provided that there is enough equity available clients often need not pay in additional funds for their sequestration which is a real bonus when they are under financial strain.
If your property is already scheduled to be auctioned by the bond holder, you can stop the auction process by declaring your intention to voluntary surrender your estate. An advertisement in the media will therefor stop the auction by the bond holder. This action is specifically advisable if there is substantial equity in the property, which can be utilized to the benefit of an insolvent estate to solve the financial predicament of the insolvent. The further benefit to stay a bank auction is that a curator, in an insolvent estate will always endeavor to first sell the property through conventional channels by utilizing agents, before he will auction the property. His actions will serve to minimalize the damages to the insolvent estate. However, in both scenarios you will lose the property.
Until a curator is appointed the insolvent may stay on at the property at no cost. Appointment of a curator can take several months. Properties sell much easier when people still reside in them and therefor it is not advisable to abandon the property during this period.
I want to sequestrate but DO NOT own a property. What do I do?
A. There is a general perception amongst the public that you cannot apply or qualify for sequestration when you do not own an immovable property. This however is not true.
We can assist you with a movable assets sequestration whereby it is not necessary to be in the possession of immovable property.
The movable assets, which include your household goods/furniture and/or vehicles, caravans, trailers, ect. which are paid in full, are utilized to reach the benefit to the creditors, amount.
You will not lose your movable assets and can buy it back from the curator appointed by the Master of the High Court, after the application have been granted.
The Insolvency act states that the creditors must benefit from the voluntary sequestration the benefit will lay in the fact that all the creditors must be treated equally as well as the percentage in Rand they will receive. Currently that percentage variates between 20 – 25c in the Rand.
The forced value (auction value) of your movable assets must at least equal the benefit to your creditors.
Should the curator grant you the opportunity to buy your movable assets back on an interest free instalment sale agreement, over a period of 24 months, you must have the necessary movable property to buy back. This will entail that you will retain all your paid furniture, vehicles, and even caravans and boats, the requirements are that these loose assets must be paid in full.
Your movable assets must be listed in an inventory. This will enable our valuator to establish if the available assets equal the benefit to the creditors, should the insolvent default on the monthly payments the curator will have the discretion to cancel the agreement to purchase the movable assets and direct an auctioneer to sell the assets on an auction it is therefore relevant to pay your monthly instalments diligently. The reason behind this whole scenario is to minimize the effect of an insolvency on the Insolvent and his/her family
What happens to my vehicle?
A. Most finance agreements with a financial institution regarding vehicle finance, is based on the so called hire purchase concept. This is an agreement where the financial institution retains the title document (natis) until they receive payment in full. This entails that the vehicle cannot be sold to a 3rd party. We must distinguish between, excluding the vehicle from the insolvent estate or including the vehicle into the insolvent estate.
- Excluding: This is the typical situation where the vehicle is being repossessed by the bank prior to the sequestration application alternatively the vehicle may be returned by the client of the financial institution prior to the publication of the insolvents intention in the media.
- Including: This is the situation where the vehicle forms part and parcel of the Insolvent Estate and the financial institution is listed as a creditor. It is usually better to include the vehicle in the sequestration if there is equity in the vehicle, for example, the outstanding amount of the vehicle is R47 000.00 and the retail value is R120 000.00 the curator will have a discretion either to return the vehicle to the bank or to sell the vehicle to capitalize on the equity in it. The insolvent will still be in possession of the vehicle until the master appoints a curator to the estate.
Whichever route you and your attorney choose to take, be aware of the fact that you will have to make alternative arrangements with regards to your mobility as you will lose the financed vehicle if you go the insolvency route.
However, this is not the case with vehicles that are paid in full. These vehicles form part of the assets in the insolvents estate, and the insolvent will have the opportunity to purchase all the paid assets of the insolvent estate from the curator.
Must I apply for a new TAX number?
A. Yes. As soon as a curator is appointed he will assist the insolvent to apply for a new TAX number with SARS.
What will happen to my insurance policies?
A. You have the right to be insured and therefor if you can afford to maintain your policies, do so.
What will happen to my cellphone contract?
A. If you can afford to maintain your monthly cellphone bill, do so.
What does the sequestration process entail?
A. Assessment of the client’s unique situation:
First and foremost, the Insolvency Practitioner must determine if the client is indeed insolvent or if another debt remedy, as provided under the National Credit Act should be investigated further, as a possible solution to the debtor’s financial distress situation.
This is done by completing an application form which provides the Insolvency Practitioner with all the information is necessary to efficiently advise clients accurately.
Decision to apply is reached, what is the next step:
Once the client decides to proceed with the application the attorney will proceed by publishing the applicant’s intention in the Government Gazette, as well as obtaining a suitable court date.
The day the advertisement appears in the media the debtor falls under the protection of the Insolvency Act 24 of 1936 which means that he/she is prohibited from making any further payments to creditors (with the exception of garnishee orders – see FAQ)
The attorney will draft a statement of debtor’s affairs, as well as all the other Court documents in support of the High Court Application. In these documents he, will state amongst other facts, the following:
* List of creditors as well as each creditors’ outstanding amount.
* The benefit to the creditors should the application be granted.
(The norm is that this variates between 20c and 25c in the Rand)
The day of the court case:
As sequestration is a High Court application an Advocate will present your case to the Court on your behalf. There is no need for you appear in court yourself.
Once your case has been heard the attorney will contact you to inform you of the results whether the application was granted or not.
After the application has been granted:
The attorney will provide you with a court order as soon as the Court typist processed the court Order.
The Master of the High court will appoint a curator who will handle the financial affairs of your Insolvent Estate.
The client will have to provide to the curator (usually through the attorney) the funds needed to pay the benefit to the creditors. The client may request the attorney to negotiate on his behalf with the curator to pay off the amount due, over a period of 18 to 24 months or provide a full settlement of the amount in one cash payment. In the event where neither of these options as available or accepted by the curator, an auctioneer will be appointed to auction off the client’s assets to recover the amount due to the creditors.
The curator will (in accordance with the regulations of the Insolvency Act), distribute the benefit to creditors, as set out in the documentation of the sequestration application.
All Creditors’ claims have been settled by the curator:
The curator will provide the insolvent with a document stating that all aspects pertaining to the insolvent estate has been satisfactorily concluded.
This document will give the insolvent permission to apply for rehabilitation.
The entire process may take up to 34 months from date of Sequestration although in some instances it can be concluded in less than 24 months. All aspects depend on your unique personal circumstances.
What are the positive effects of sequestration?
A. You rid yourself of up to 80% of your debt, if you choose to pay the benefit to your creditors over a period of 18 – 24 Months no interest is applicable over this period. This in itself is a major benefit to the insolvent.
All legal procedures instituted by your creditors will be stayed with the publication of your intention in the media. Judgments already obtained by your creditors against you will also be included in the sequestration. Garnishee orders obtained by your creditors will cease to be operational as soon as you present your employer with the High Court Order.
The Creditors may not receive or demand payment from the Insolvent and must submit their claims to the Curator. The Curator will have a discretion to acknowledge or refuse a creditors claim. The insolvent is not involved in the administration of the Insolvent Estate.
Harassment by creditors is minimized (if not eliminated) as they are referred to the sequestration Attorney or the Curator.
Your future income is protected through preventing creditors form attaching your remuneration via the garnishee process.
The opportunity to pay off the benefit to your creditors, over a period, interest free in monthly instalments, will have a positive effect on your monthly cash flow not even to mention the effect of wellbeing it will have on your psyche. no need for you appear in court yourself.
What are the negative effects of sequestration?
A. You will not be able to act as a member of a Closed Corporation or as a director of a company.
You will not be able to have or administrate a Trust Account. Example, Attorney’s Trust Account, Property Agents Trust Account etc.
Your credit record with the credit bureaus will reflect your insolvent status which will prevent you from obtaining further credit until you have rehabilitated (for more information see Rehabilitation).
Some high end financial employment positions may be affected negatively and should be double checked by your company’s policies and procedure or you can contact any of our Insolvency Practitioners for more information.
What are the costs involved to sequestrate?
A. The cost involved to start the proses vary between R6,500.00 and R9,500.00 depending on the province the applicant resides in. Please contact our Head Office for a quote on your sequestration.
The remainder of the costs which are determined by the actual particulars of your case and which vary from case to case will be added to the creditors benefit amount which you will be able to pay in equal installments, over a period of 18 to 24 months.
For this reason, it is imperative that you are employed and that you remain employed for as long as you are still paying off the amount owed to conclude the sequestration process.
Fill in the form below and we will get back to you…