Is Sequestration an Effective Debt Solution in South Africa?

Below, we answer some of the frequently asked questions about voluntary sequestration as an effective debt solution to help you make an informed decision, and to dispel some of the myths surrounding voluntary sequestration in South Africa.

I do not want to lose my computer, as I need it for work, so how can I prevent it from forming part of the surrendered estate?

If you use your computer specifically for work and to generate income, it qualifies a tool of trade. With voluntary sequestration, tools of trade are excluded from the sequestration process. However, you must have sufficient proof that the piece of equipment is needed in the generation of your daily income. We can assist in this regard. Even if it is included in the surrendered estate, it is possible to negotiate to buy it back from the insolvent estate at the lowered auction value. As such, it will not be removed from your house, but it will be written up. You will then buy it back from the estate at a very affordable price.

I do not have property; how can I make use of sequestration as an effective debt solution?

You can still apply for voluntary sequestration without immovable property, but the value of your movable assets must be enough to ensure that the sale thereof on auction, as arranged by the curator, can cover the costs of sequestration and provide for sufficient benefit to the creditors. You can also sequestrate by means of paying a cash lump sum.

I do not want to lose all my furniture and the children’s assets; can I still make use of sequestration as an effective debt solution?

Yes. Your children’s assets are excluded from the sequestration and are thus safe. In terms of furniture, the items will form part of the estate, but we can arrange for you to buy it back from the estate at an affordable price. This means the furniture will not be removed from your house.

Will I lose my pension?

No. Voluntary sequestration is an effective debt solution, not a means to rob you of your hard-earned pension. The pension is excluded from the insolvent estate.

What if creditors still harass me after commencement of the sequestration application?

Simply tell them to speak to your lawyers. You cannot and may not make any further payments to any creditors once the application process has started. This is to prevent one creditor from being favoured over another. As such, refer the creditors to us and we will handle further communication.

I do not want to stay under sequestration for long; is there a way I can apply for rehabilitation sooner?

The Insolvency Act stipulates the period that must lapse before you can apply for rehabilitation. One reason voluntary sequestration is an effective debt solution is because the process can be completed in a few months. Once done, and the final distribution account has been submitted to the Master, you can, after a period of 12 months, apply for rehabilitation. We recommend speaking to us about the requirements and how to become rehabilitated within the shortest possible period.

Why do I need an income if I want to sequestrate?

Unless you can pay the 20 c out of the rand, the sequestration costs and legal fees by means of a lump sum, or the sale of your assets provide for sufficient funds to cover the legal costs and ensure benefit to the creditors, you will need an income. This is so because you will pay off the remainder of the debt over a period of 18 to 24 months. The amount will be affordable, as no additional interest can be charged on the debt.

Can my employer terminate my employment contract if I make use of sequestration as an effective debt solution?

No, unless a condition is stipulated in your employment contact giving the employer the right to terminate employment if you are sequestrated. You cannot be a director of a company while under sequestration, and cannot hold certain positions, best discussed with our team of experienced insolvency attorneys.

What is the first step?

Get in touch with our team to help you determine whether sequestration will be an effective debt solution for your particular situation.

 


Disclaimer: This article is for informational purposes only and does not constitute legal advice. You are advised to consult with us before using/relying on this information. Information is relevant to the date of publication – January 2018.

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