Avoid These Mistakes When Dealing with Creditors in South Africa

According to the regulations of the Insolvency Act of South Africa, there are eight instances where the actions of the debtor show that the debtor is insolvent, giving the creditor the right to apply for compulsory sequestration of the debtor. Be careful about your interactions with creditors. If you are unsure of what to do, speak to insolvency attorneys who can help you take the appropriate steps in dealing with debt and creditors. Below are the acts of insolvency:

  1. Writing a Letter to a Creditor Stating That You Want to Be Released from Your Debt Through a Settlement Offer.

Before you write a letter to a creditor to offer a settlement amount for the debt owed in return for a portion of the debt to be written off, consider that it is an act of insolvency. According to the Insolvency Act of South Africa, the creditor can use the letter as your admission to be insolvent, and use it to form the basis for a compulsory sequestration of your estate.

  1. Writing a Letter to a Creditor in Which You Admit That You are Unable to Pay The Debt.

You also perform an act of insolvency in South Africa if you admit, in writing, that you cannot pay your debt, and are willing or able to pay instalments of a lower amount.

  1. Absconding Without Notifying a Creditor of Your New Address.

If you leave your home or country in an attempt not to pay your debt, it is an act of insolvency. However, this intention is rather difficult to prove, and is not the best basis for a forced sequestration of a debtor.

  1. Judgment Was Awarded Against You, but You Fail to Pay or Cannot Pay The Judgment Because You Do not Have Sufficient Assets to Sell in Order to Settle the Judgment Amount.

If a judgment was awarded against you, and you fail to pay such, the creditor has the right to bring a sequestration application against you, according to the regulations of the Insolvency Act of South Africa. Indeed, any of your creditors can then submit such an application, based on your inability to settle the judgment amount.

  1. Hiding, Selling, or Removing Assets with The Intention to Prevent a Creditor from Selling Your Assets, or Doing So to Benefit One Creditor Over Another

The Insolvency Act of South Africa is clear on the issue. You cannot sell or alienate any of your assets six months before sequestration. According to the requirements of the law, a trustee can reverse any such transactions up to two years before the date of sequestration. Keep in mind that this only applies if you intend to apply for sequestration. In all other instances, you can sell your assets, even on the same date as the Warrant of Execution. In addition, you must intend to benefit one creditor over another.

  1. When You Benefit One Creditor Over Others

This brings us to the issue of one creditor being benefitted from the sale of assets. You cannot sell your assets in order to pay off one creditor, and then leave the others high and dry. Indeed, there is no need to prove your intention with this. It is immediately deemed as an act of insolvency.

  1. Not Proceeding with Sequestration After You Have Published a Notice of Your Intention to Surrender Your Estate

Once you have published the intention to voluntary sequestrate, you cannot change your mind. There have been instances where debtors have published their intent to sequestrate in an attempt to stop execution sales of their assets. It is an unethical practice, and immediately becomes an act of insolvency in South Africa.

  1. Not Paying Debt Owed After Advertising the Sale of Your Business

If you have advertised that your business is for sale, and have sold it, you need to place an advert to the effect in a newspaper, according to the requirements of the Insolvency Act of South Africa. It serves to notify creditors of the sale. However, you must still pay the debt owed. If you do not pay the debt, the creditors can take it that you are unable to do so, and deem it an act of insolvency.

Avoid any of the actions above. Speak to our attorneys about suitable steps to take in solving debt problems in South Africa in-line with the Insolvency Act.

 


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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