How Does Sequestration Work in South Africa? Answers to Your Questions

You cannot make a decision that will affect the rest of your life if you do not have the necessary information. We understand that to become debt-free is your priority. However, to help you understand the process, we answer the question “how does sequestration work in South Africa” and related questions below.


How Does Sequestration Work in South Africa If You Are Married in Community of Property?

voluntary sequestrationIf you are marred in community of property, you have a joint estate. This means both partners are sequestrated. Also keep in mind that you must both adhere to all the requirements regarding the process. This also includes being truthful about the extent of your debt and your assets.

You will both apply to be sequestrated. Unfortunately, both will lose assets in the process. However, you will both become debt-free within a short period. It is a single application because it is a joint estate.


How Does Sequestration Work in South Africa in Terms of the Assets of Your Spouse When You Are Married Out of Community of Property?

You have separate financial estates. However, your spouse’s assets are included in your surrendered estate until your spouse is able to prove that the specific assets belong to them and not to you jointly. We recommend consulting with our attorneys regarding the appropriate steps to take for the protection of your spouse’s assets.


What About Your Pension Money?

Fortunately, your pension money is safe and excluded from the surrendered estate. This also applies to your salary. Garnishee orders are cancelled and interest on debt is frozen. Even if there is a shortfall after the assets have been sold, and you must pay for such, you will be able to do so in a short period because you do not have to deal with interest that accumulates.


Other Assets Excluded from the Sequestration?

Personal injury claims money is also excluded. However, inheritance money forms part of the estate even after you have been sequestrated. Only when you have been rehabilitated is your inheritance safe. You can protect it by declining acceptance and have it go to another beneficiary. This may be necessary if you inherit property, but do not want it to be part of the estate. Rather than the family farm being sold as part of the sequestration process, you can have it go to another beneficiary.


How Does Sequestration Work in South Africa in Terms of the Process?

If you are unable to pay your debts and your liabilities exceed your assets, you can apply for voluntary sequestration in the High Court of South Africa. The court must be satisfied that the voluntary surrendering of your estate is to the benefit of the creditors. You must be truly insolvent. The sale of assets must render sufficient funds to ensure the cost of the sequestration can be covered and that the creditors receive at least 20 cents out of the rand.

Once the court approves the surrendering of your estate, a trustee is appointed to oversee the sale of assets and distribution of the money to the creditors. The trustee will call a meeting with the creditors and you will have to attend. You will be required to assist the trustee in the identification of the assets and must make your books and financial records available to the trustee. You will also have to comply when asked to furnish the stated assets.

Once the sale of the assets has taken place and the creditors have received their benefits, the trustee will prepare the first liquidation account for submission to the Master of the High Court. You can apply for rehabilitation once the time and minimum requirements have been met. While you are under sequestration in South Africa, you need permission from the trustee to enter into credit agreements.


How Does Sequestration Work in South Africa in Terms of a Rental Contract?

The trustee decides whether or not to keep with the rental contract you have in place with the landlord. As such, you may have to find another place to live, but it is also possible that the trustee will allow for the contract to proceed as is.


What Happens If You Are a Director of a Company in South Africa When You Are Sequestrated?

You will have to resign and have the company registration papers reflect such. You are not allowed to hold a position as director or be part of the management of a close corporation in South Africa while under sequestration. Certain government positions are also excluded. You may not be a trustee of an estate during the period. It is thus best to discuss how the process will affect your work position with our insolvency practitioners.


What Happens Before the Court Hearing?

Certain formalities must be met. These are important, as failure to comply with the requirements can affect the application success. One such a formality is to publish a notice of your intention to sequestrate in the Government Gazette. In addition, a notice is submitted to SARS and your creditors listed receive notices. A notice is published in the relevant newspaper. A specific time frame applies for this, as you cannot publish this notice months ahead since it will severely disadvantage the creditors. At the same time, the notice must be published early enough to give the creditors time to review, respond, and prepare their claims or objections regarding the sequestration.

Our attorneys prepare the statement of affairs that details your financial state. This includes the list of assets, estimated value, the liabilities, creditors, and more. In addition, we help you draft the affidavit regarding the reason for applying for sequestration and how your financial situation developed.

The creditors get time to inspect the relevant documentation. We represent you at the court hearing. You do not have to be there.


How Long Do You Have Before You Have to Move Out of Your Home If It Forms Part of The Surrendered Estate?

You will have enough time to find a new home, as the property must first be written up, the auction arranged, and the sale executed. Thereafter, the transfer to the new owner must take place. This entails the normal period of six weeks to three months or longer. As such, you will not have to leave your abode in a hurry.


What About Tools of Trade?

The proceedings are not to keep you from earning a living. As such, your tools of trade are safe. However, we recommend consulting with our attorneys on what can be seen as tools of trade.


How Does it Work if You Do Not Go Through with The Sequestration in South Africa?

If the notice of your intention to sequestrate has already been published, you must have an exceptionally good reason not to go through with the surrendering of your estate. The creditors can immediately apply for the compulsory sequestration of your estate, as such is deemed an act of insolvency. If your financial situation has changed overnight and you can pay the creditors in full, then consult with our attorneys regarding the proper procedures.


Where Can You Get More Information on How Sequestration Works in South Africa?

Get in touch with our insolvency practitioners who will answer your questions to help you make an informed decision on which debt solution is best for your situation.


Disclaimer: Information in this article is not intended as legal advice and is only for informational purposes. Please seek legal guidance from our attorneys before relying on this information to make any legal decisions.

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