Are you in financial trouble and fear that creditors will apply for judgment against you? Are you under debt review and unable to make the monthly consolidated payment? Did you know that it is possible to get rid of your debt once and for all? Want to know more? Then read on to discover why and how to apply for voluntary sequestration in South Africa.

In this article, we will look at when an application for voluntary sequestration is the answer to debt problems and how to apply for such. We also discuss the process, starting with a basic summary of what it entails, upon which we elaborate on specific aspects.

 

When to Apply for Voluntary Sequestration in South Africa

voluntary sequestrationIf you have an income, but are unable to pay debts when due, you may want to apply for debt review as opposed to voluntary sequestration. This is applicable if the debt amount is still reasonable, enabling you to pay it off within five years if you follow the debt review process. If, however, you are cash- and capital-insolvent, voluntary sequestration is an option. It is usually a last resort because it means the loss of assets, loss of control over your own financial estate, and a long-term effect on your credit history.

 

With Such Negative Effects, Why Would You Want to Apply for Voluntary Sequestration?

Voluntary sequestration makes it possible to get up to 80% of the debt written off. How is it possible? It is possible because each creditor must be able to receive at least 20 cents out of the rand from the sale of your assets on auction by the trustee. It means that if you owe R200 000 to the creditors in total, the sale of your assets must provide for at least R40 000 benefits for the creditors. The sale of assets must also be enough to pay the trustee and the legal fees.

If you are truly insolvent, which means your liabilities exceed your assets and you are not able to pay debts when due, then you qualify for voluntary sequestration. It makes it possible to become debt-free in a relatively short period. Although you must be able to pay the initial sequestration legal fees of the insolvency practitioners, the remainder can be paid off over a period of 18 to 24 months if not covered by the sale of assets.

A judgment that is not paid stays valid for 30 years. It means that for three decades, you will not be able to get credit because of the judgment unless you pay the amount owed. With voluntary sequestration, all the creditors are dealt with as a collective. They have to wait for the court order, appointment of the trustee, and distribution of the benefits. They cannot take judgment against you if you have applied for voluntary sequestration. All legal action by the creditors will be stayed with immediate effect upon the publication of your intention to sequestrate. You can immediately bring an end to the creditor harassment, and can use the money to pay for the voluntary sequestration fees.

You get a new tax number. If SARS is one of the creditors or perhaps the reason for having to sequestrate, you have the benefit of getting an entirely new estate with its own tax number. After being sequestrated, you will no longer owe SARS money on the old tax number. It is a fresh start. You can apply for rehabilitation as soon as all the requirements have been met.

 

How Do You Apply for Voluntary Sequestration?

Start with the completion of our online assessment form to determine your financial status. You can complete it at your own pace. The form is submitted, and our attorneys use the information to determine whether or not you are insolvent. They also determine if voluntary sequestration is the best and most suitable option for you. If not, they help you consider the other debt remedies available in South Africa.

 

What the Process Entails

When you apply for voluntary sequestration, the insolvency practitioners help you determine the costs, the duration of the process, and more. A summary of the process is given below, helping you to see what happens when you apply for the surrendering of your estate.

Once you decide to apply after the insolvency attorneys have determined that you qualify for the process, the insolvency practitioners publish your intention to apply for voluntary sequestration in the Government Gazette. The creditors are notified. A court date is obtained.

The day in which the intention to apply for voluntary sequestration is published in the Government Gazette is when you receive immediate protection against further legal action from the creditors. The interest on the debts is frozen and you may no longer make payments to the creditors. This is to prevent one creditor from being paid while the others go without.

This also affords you a short payment break, which can be used to save up money for deposit on a house to rent. You can also use the money to pay the insolvency practitioner fees or save up for a deposit on a vehicle.

Next comes the statement of affairs. The insolvency attorneys draft it on your behalf, using the information that you have provided with your application. They submit it along with other relevant documents to the court.

 

What is Included in the Statement of Affairs?

The creditors are listed with the principal debts owed to each and the outstanding amounts. It also states the benefit that the creditors will receive if the court grants the application. This can be from 20 cents to 25 cents in the rand. In essence, the statement of affairs provides the court insight into your financial state.

 

Application in Court

The court hearing follows. Although the court can demand that you appear before it, the chances for such are slim. The attorneys appear on your behalf. The attorneys will also notify you of the hearing outcome. The court will issue an order, which will be provided to you by the attorneys. You are then officially declared as bankrupt.

 

Appointment of the Curator

The Master of the High Court oversees your estate until an appropriate curator/trustee has been appointed. Once the curator has been appointed, they will handle the affairs of your estate. You will be expected to provide the money needed to pay the benefit of the creditors. If you cannot do so, then the attorney will negotiate to have it paid off over a period of 18 to 24 months.

If you cannot pay the minimum benefit or the curator does not accept the offer to do so, then an auctioneer is appointed and your assets are written up to be sold on auction. This is to ensure that the creditors can receive their benefits. The benefits are distributed among the creditors according to the stipulations of the South African Insolvency Act.

 

How to Apply for Rehabilitation

Once the creditors have received their benefits, the curator submits their liquidation account. You will receive proof of the proceedings regarding the sale of assets and distribution of benefits. Once you have this document, you can apply for rehabilitation.

The process can take up 34 months, although it is possible to have the process completed within 24 months. The time frame depends on your particular estate and circumstances. It is thus possible to apply for voluntary sequestration without losing your assets in the process. Keep in mind that the curator has the final say on this. However, if you can have the benefit amount ready to pay each of the creditors or are employed, you have the possibility to do so over a period of 18 to 24 months. If your assets are sold on auction, it is also possible for the attorneys to negotiate the buyback of assets, such as furniture and firearms, without these forming part of the auction process.

The process does take time, but it is a viable option for becoming debt-free faster than with most other debt management solutions. Get in touch for help on how to apply for voluntary sequestration or start by completing the assessment form.

 


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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