How to Start the Process for Declaring Insolvency as An Individual

Declaring insolvency as an individual in South Africa is a way out if debts have piled up. But to do so, you must be able to prove that you are cashflow and asset insolvent.


What is cashflow insolvent?

You cannot pay debts when they are due. Your income is insufficient to pay living expenses and creditors. If you juggle between credit cards and bank accounts to pay creditors, you probably do not have enough income to pay your debts. If this is you, continue reading. A solution is available.


What is asset insolvent?

Your liabilities exceed your assets. A vehicle is an asset. So is your house. Your policies are assets, in addition to stocks or shares. If the debt liability total is higher than the value of your assets, you qualify as insolvent, provided you cannot pay debts when they are due.


How do I prove insolvency?

Your attorneys draft the statement of affairs and the motivation for declaring insolvency as an individual. You sign the statement of affairs and an affidavit in which the reasons for becoming insolvent are outlined. To start the process, the attorneys require a list of the creditors and the amount owed to each, as well as the interest, instalments, and the total of the original debts to each. In addition, they need an income and expense report. You need to submit a list of your assets. They will help you determine the value of each. Armed with the information, they determine the merits of your application; thus whether you are insolvent or should consider another debt solution.


What does the process entail?

Declaring insolvency as an individual entails a legal application to court to be declared bankrupt. If approved, your legal status changes to “sequestrated”. You no longer have control over your financial estate surrendered to court. The court appoints a trustee to manage the sale of assets and distribution of proceeds to the creditors. The attorneys start the process by bringing an urgent application for voluntary sequestration. The court sets a date for the final hearing. Meanwhile, the attorneys publish the notice of your intention to apply for voluntary sequestration. This notice appears in the Government Gazette and a relevant newspaper. They notify the listed creditors and SARS of your intention to sequestrate. Creditors can submit their objections. If no objections are received and the formality requirements are met, in addition to the requirements for declaring insolvency as an individual, the court awards the sequestration.


How do I start the process?

Get in touch with our team of lawyers for more information and help in declaring insolvency as an individual.


Disclaimer: This article is for informational purposes only and does not constitute legal advice. Call our attorneys rather than relying on the information herein to make any decisions. The information is relevant to the date of publishing: October 2019.

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