How Does Sequestration Work in South Africa?

If you have recently been divorced, and ended up with all the debt, you may now struggle to make ends meet, not to mention having difficulty in paying the debt, which, in the past, was serviced from both partners in the marriage. Perhaps, you have lost your job or had to close your business, and now struggle to pay all the debt for which you signed surety, or maybe the bank repossessed your vehicles and you sit with the shortfall to pay.

You may have entered debt review to solve your problem, but have found that you can still not service the debt, and are concerned that you will miss a payment and lose all your assets. Perhaps you have entered into a debt repayment agreement, but the interest has made it impossible to service the debt? Is there a solution? Are you insolvent? Have you considered applying for voluntary sequestration in South Africa?


How Does Sequestration Work?

Perhaps you have not yet considered voluntary sequestration simply because of misconceptions about the impact and process involved. We will answer the question of how sequestration does work below. For more information and legal guidance, we highly recommend speaking to our attorneys who will give you in-depth answers.


Determine If You QualifyHow Does Sequestration Work Afterwards?

The court will set a final hearing date, and the creditors will have time to object to the application for sequestration. If no objections are received, the court will award the sequestration, and a court-appointed trustee will take over management of your surrendered estate. You are then under sequestration.

No creditors can bring any more claims against you. The trustee deals with the creditors as a collective. The assets are valued, written up, and sold at auction. The proceeds go towards payment of the administrative costs, debts owed to SARS, employees, and creditors with security against the debts. The rest is distributed to the other creditors. With voluntary sequestration, you can get rid of up to 80 per cent of your debts in one go. Any shortfall is payable in cash, or by agreement over a period of up to 24 months with no added interest.


How Does Sequestration Work in Terms of Your Status?

Your record at the credit bureaux will indicate sequestrated. You will not be able hold the position of director, and you will not be able to enter into a credit agreement without permission from the trustee. You will need to state the truth about your legal status if so requested by a creditor. You will still be able to work, earn income, rent a home, and more. Most importantly, you will be debt-free, and can apply for rehabilitation as soon as all requirements are met.

Speak to our attorneys about the process, implications, and costs to help determine whether you will benefit from voluntary sequestration as a means to become debt free in South Africa.


Disclaimer: This article is for informational purposes only and does not constitute legal advice. Call on 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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