What You Need to Know to Apply for Voluntary Sequestration in South Africa

Did you lose a large part of your income during the South African response to the worldwide health crisis? Are you afraid that the creditors may initiate legal proceedings for debt collection? Are you about to lose your tools of trade, furniture, and even costume jewellery because of debts owed? You can now apply for voluntary sequestration and have up to 80% of the debt written off.


Did You Know You Can Apply for Voluntary Sequestration in South Africa Even If You Are Under Debt Review?

Although debt review may have been the debt relief solution you needed at the time, the recent economic crisis may have changed your income situation. Perhaps you have missed a payment or have been late with a single payment, and the debt review has been cancelled. Unfortunately, the law stipulates that a single payment missed or late payment made is sufficient reason for a creditor to cancel the agreement and initiate legal steps for recovery of the full amount and interest. If you have three or more creditors, it means they can all take legal steps against you. The way out is to immediately apply for voluntary sequestration. Once the intention to apply for voluntary sequestration has been published, no further legal action can be taken by the creditors.


What Happens If Creditors Have Already Initiated Legal Action?

When you apply for voluntary sequestration, the court provides a provisional grant, and on the final hearing date, your estate surrendering is accepted and you are declared bankrupt. Once the notice of the intention to voluntary sequestrate has been published, all legal action is stayed. This includes the legal actions taken by debt collectors, creditors in relation to your missing a debt review payment, and garnishee orders on your salary. No more interest on the debt and certainly no more harassment calls from creditors since you cannot pay any creditors once the notice of your intention to apply for voluntary sequestration has been published.


What If A Creditor Demands Payment?

sequestrationSimply refer the creditor to the insolvency law attorneys. The law prohibits the benefit of one creditor over the others. Indeed, should you make payments to the particular creditor during the time after your intention to apply for the surrendering of your estate has been published, you benefit the particular creditor. The other creditors can lodge objections at the court, and the creditor may be ordered to pay all the money received over to the appointed curator/trustee for fair distribution among the creditors. It is thus best to simply refer a creditor to your attorneys.


What Happens to Furniture, Tools of The Trade, Toys, and Jewellery During the Voluntary Sequestration?

Your furniture is rather safe unless you have antique pieces that are worth a lot of money, such as a grandfather clock or a grand piano. Normally, furniture does not sell for enough money through an auction to pay for the debts owed. As such, the curator/trustee is often willing to have you buy back the furniture from the surrendered estate at the very low auction reserve price. The furniture is thus written up at your home, but not removed. Our attorneys negotiate for buyback, and you get to keep your furniture.

In terms of tools of the trade, the items you need to earn a living form part of the tools of the trade. If you are an electrician by trade, then all the tools associated with such will be excluded from the insolvency proceedings. If you work from home, using your computer for such, then it is possible to have it excluded from the surrendered insolvent estate.

Toys and other assets of your children are safe. Of course, the super-bike and the sports car in the driveway can hardly go through as your daughter’s assets if she is only three years old. Transferring assets into the name of your son or daughter should not be done as a means to mislead the court or hide your assets. The legitimate assets of your kids are excluded from the insolvency proceedings.

Jewellery can be excluded if it is costume jewellery, but if heirloom pieces, such as diamond earrings and expensive watches are among the pieces, you can expect such pieces to be included in the voluntary sequestration process.


What About Firearms, Pension Money, And Inheritance Claims?

Firearms are mostly excluded because of the difficulty to store and transport firearms safely in South Africa. This is so because many laws and red tape surround gun ownership, storage, and protection in the country.

The curator/trustee will find it difficult to sell the firearm, store it, and transport it. As such, you can expect the firearm to be written up, but not removed. You can buy back the item at the low auction reservation price.

Pension money is safe as the intention of voluntary sequestration is not to eliminate your means of earning a living. Your salary is also safe, and your employer is not notified of your application for voluntary sequestration. What is not safe is inheritance money. The only way to have such excluded is to decline the inheritance. Though you may not get the money, at least it goes to another loved one and not a group of creditors.


What Are the Minimum Requirements to Be Declared Bankrupt?

The insolvency proceedings must benefit the creditors. This means the minimum of at least 20 cents from the rand must be achievable through the sale of assets on the auction. In simpler terms, it means that the creditors must be able to receive at least 20 cents out of each rand you owe them. If you thus owe R100 000 on a debt, the creditor must be able to receive at least R20 000. Considering that R80 000 of the amount is written off, it becomes clear why it is the most affordable means to become debt-free.


What Do You Need to Apply for Voluntary Sequestration?

Our attorneys first need to determine if you meet the requirements for insolvency. Your liabilities must exceed your assets and you must not be able to pay debts when due. If you are truly insolvent, the next step is to apply to court for the surrendering of your estate. For this, you will need to provide the list of creditors and their contact details. You also need to list the totals owed to each, monthly instalments, and original debts. You also need to list your monthly expenses, such as rent, school fees, fuel costs, and more. List income from salary, rental, royalties, and shares. Make a list of assets and indicate which assets have been used as security for debts. Be careful not to leave a creditor out.

We will help you draft the statement of affairs and the affidavit to be submitted to court. You do not have to appear in court as our attorneys represent you. They will let you know of the outcome. If you are married in community of property, you and your spouse must apply for voluntary sequestration as you share an estate.


Where to Get Legal Help

Get in touch with our attorneys for answers on your questions and for legal help to apply for voluntary sequestration in South Africa.


Disclaimer: This article is for information 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.

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