How to Get Out of Debt Through Voluntary Sequestration in South Africa

If you are desperate to get out of debt, and have sufficient assets, to ensure that if they are sold by a court-appointed trustee, and that it can generate adequate funds to pay at least 20 per cent to creditors with claims against your estate, then you can apply for voluntary sequestration.

Understandably, you will initially want to try get out of debt by selling your assets, using a debt consolidation loan, taking on part-time jobs in addition to your current job, or borrowing money from a family member.  However, if you cannot do any of the above, or have tried, but now face foreclosure on your house and repossession of your vehicles, you may want to consider voluntary sequestration to get out of debt.

Indeed, it is not the easiest way to get out of debt, but it does make it possible to get rid of up to 80 per cent of your debt in one go. The remainder can be paid in a lump sum, or via payments over a period of 18 to 24 months, with no added interest.

Debt review is also an option, but if you owe a large amount on your home mortgage, it will mean that you will stay under debt review for many years. This can seriously hinder your ability to regain financial control and start fresh. With debt review, you still have the debt, and must pay it off through a consolidated monthly amount. One missed payment will mean the end of debt review, and the creditors can take immediate legal action.

You may even already be under debt review, and are still struggling to pay even the consolidated amount. In this instance, you will still be able to apply for voluntary sequestration.

Requirements

You must be able to show that you are, in fact, insolvent, and are unable to pay creditors. In addition, you must have sufficient assets, to ensure that the sale thereof can provide the minimum benefit to creditors, as required by the court. You must also be able to pay the legal fees, estate administration fees, and the costs associated with sequestration, through the sale of your assets. If you are married in community of property, you and your spouse must apply for voluntary sequestration. If you are married out of community of property, your spouse will need to prove that certain assets belong to them.

The first step is to determine whether you meet the requirements. Our attorneys assess your financial status, to help you determine whether voluntary sequestration will be an option for you, to get out of debt. They also discuss the risks, benefits, and procedures regarding the process.

How Voluntary Sequestration Works

Many people shy away from voluntary sequestration, as a legal means to get out of debt, simply because they do not understand the process. However, our attorneys are here to handle the entire process, and assist clients from the first appointment, right through to rehabilitation.

The attorneys apply for voluntary sequestration on your behalf. The application is submitted to the High Court, for an order to have your estate surrendered to the Master of the High Court. The Master appoints a trustee to manage the estate, with the purpose of realising the assets, according to the requirements of the law. The proceeds of sale are distributed to the various creditors, after the estate administration costs have been paid.

The creditors can no longer claim money from you, and they are treated as a collective. As such, creditor harassment stops. They cannot add interest to the debt, and the debt, at the time of sequestration, stays the same. The assets are written up and valued. The trustee then sells the assets on auction, and the creditors receive their benefits. You remain under sequestration until you have been rehabilitated. Different timeframes apply to when you can apply for rehabilitation. If you do not apply, you remain under sequestration for a period of ten years. However, the general period before rehabilitation is about four years.

You can get out of debt for mortgages, vehicle finance, store accounts, credit cards, and loans. However, certain debts are not included in the surrendered estate, such as water and electricity accounts that must be paid.

Take the guesswork out of voluntary sequestration. Call our attorneys to help you determine if it is a suitable solution to get out of debt.

 


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

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