Insolvency – Unable to Pay Your Debt? What are the Options?

Facing insolvency? If debt is spiralling out of control, what can you do? Apart from entering debt review or getting a debt consolidation loan, you may not have many choices. Debt review can also exacerbate the situation, especially if your spouse loses their income during your debt review period. Voluntary sequestration may not be the first option, but it does provide a workable solution. Here is why:

  • Creditor harassment stops the moment your intention to voluntary sequestrate is published.
  • You have experienced insolvency attorneys to help you through the process.
  • Up to 80% of the debt is written off.
  • You can be debt-free within a few months.
  • All payments to creditors stop the moment the notice of intended voluntary sequestration is published.
  • All interest on the outstanding debts is frozen.
  • Start over without needing a large amount monthly to pay creditors.
  • Garnishee orders on your salary are cancelled.

 

You may be wondering, if voluntary sequestration has all these benefits if you are unable to pay your debt, then why don’t more people follow this route to get rid of their debts? As with any debt solution, voluntary sequestration also has its downside. Things to keep in mind before you file for bankruptcy include:

  • You are not allowed to be a director of a company/member of a close corporation while under sequestration.
  • Certain government positions cannot be held if you are sequestrated.
  • If you own property, it will form part of the insolvent estate.
  • You will need permission from the appointed trustee/curator to enter into credit agreements.
  • You will no longer be in control of your financial estate.
  • Many of your assets will be sold on auction.
  • You cannot operate as a general trader.
  • You may not hold a liquor licence.
  • You will have to declare your sequestrated status when asked about it on a form.

 

insolvency implicationsWeigh the advantages and disadvantages before making a final decision on voluntary sequestration as a means of dealing with insolvency. If you are truly unable to pay your debt, then it may still be the best solution, even with consideration of the disadvantages.

 

Do You Qualify for Insolvency?

Not everyone qualifies. Keep in mind that insolvency proceedings should be to the benefit of the creditors. It is not meant as payment holiday or a means to ditch financial responsibilities. To this end, the court must be satisfied that you are truly insolvent. This means your liabilities must exceed your assets, and you must be unable to pay the debts when due.

Living a luxury lifestyle while ignoring the responsibility to pay debts does not help. If you have cut back on entertainment and unnecessary expenses, but are still unable to pay creditors, then the debt problem is sufficient to qualify for voluntary sequestration – that is if your liabilities also exceed your assets.

You can also be too “poor” for voluntary sequestration, as another requirement is that the sale of assets must provide for sufficient proceeds to pay for the legal costs, the trustee/curator, and the minimum required benefits for the creditors.

 

What to do if You Do Not Qualify for Insolvency

In the instance of not being truly insolvent, make use of our expertise to help restructure the debts and to enter into a compromise with the creditors. Various alternatives can be considered, best discussed with our insolvency attorneys. Should you not qualify because your estate is not sufficient to ensure the required minimum benefits to the creditors and payment of all the insolvency proceedings, you can opt for debt review or administration. Do not despair, as it may still be possible to apply for voluntary sequestration. Consult with our attorneys about viable solutions.

 

What to do Immediately?

Draw up a list of all the creditors, their contact details, and the total amount outstanding for each. Also state the monthly payments, interest on each debt payable, and whether it is a secured or unsecured debt. Do not leave out any creditors, not even the ones with whom you had no contact for months or years. It is possible that they have sold the debts. Do not assume a debt has prescribed.

Make a list of all your immovable and movable assets (unencumbered by debt). Do the same for each asset still under finance. List your monthly incomes (such as income from rent, salary, royalties, commissions, pension, investments, etc.). List the monthly expenses other than debt, such as:

  • Municipal rates and taxes (if you own property)
  • Utility services
  • Telecommunication
  • Internet connection
  • Fuel
  • Vehicle maintenance
  • Mobile phone contracts
  • Cleaning
  • Gardening
  • Security
  • Insurance
  • School fees
  • Training
  • Groceries
  • Clothing

 

The above are just examples. List all the essential monthly expenses.

Our insolvency attorneys will use the information to determine the financial state of your estate and advise you accordingly. You can use the online assessment form to perform this task.

 

What Will be Expected from You During the Sequestration Process?

You will not have to appear in court. Our attorneys will represent you. You will be required to complete a statement of affairs and an affidavit that states the history of the debt and circumstances surrounding the insolvency. Our attorneys will assist with the process. They will also handle the notice publication, notification of creditors, and negotiation with the appointed trustee/curator on assets, such as furniture and your firearms. These can be bought back from the insolvent estate at the low auction value.

You will have to attend a meeting with the trustee/curator and with the creditors. Here too you will not be on your own. It is imperative to give your cooperation throughout the process, as the trustee/curator will, at the end of the day, have to give permission for your rehabilitation. The aim is also to rehabilitate as soon as the time frame and other requirements are met.

 

Let us Clear up Misconceptions About Insolvency

Your pension, tools of trade, salary, money from a personal injury claim, and your children’s assets are excluded from the insolvency proceedings. You will not be left without a bed or have to leave your home immediately. The insolvency application must be heard in court, a trustee/curator appointed, creditor meeting set up, the auction arranged, and the property sold, before you will have to move out. Even then, you will still have the time between selling and property transfer to stay in the house. During this time, you will not pay creditors and will be able to save up money to put up as a deposit for a rental place.

In the instance of you already renting a home, the trustee/curator will decide whether or not to stay with the rental agreement. You will also have enough time to find a new place to stay.

 

Final Thoughts

If you are unable to pay your debts and are insolvent, do not wait for the creditors to take action. They are likely to attach assets rather than initialise insolvency proceedings. This will mean that you will still have debt but will no longer have the assets.

Take the responsible step to solve the debt problem. Use the online form to assess your financial situation and get in touch with our insolvency attorneys for immediate legal help.

 


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.

CONTACT US
close slider