Insolvency – Answers to the Question of How Long Does It Takes

Insolvency is an ideal legal method to regain financial stability and getting rid of debt. The insolvency is attained through the surrendering of one’s estate as a natural person. The assets in the estate are valued and then sold on auction. The proceeds from the sale are distributed among the creditors to ensure each creditor receives at least 20 cents out of the rand. Once the sequestration process is complete, the insolvent party can, after a period of four years, apply for rehabilitation. As such, on the question of how long insolvency would take, the answer is that it depends on factors such as how long it takes to get the court order for bankruptcy, the curator appointed, sale of execution arranged, and assets sold.

However, in the case of voluntary sequestration, the process entails the appointment with the attorneys, provision of the required documents, and the application for the provisional order. The attorneys then publish the notice of the intention to sequestrate in the relevant publications. The court awards the provisional order and the creditors have a set period to lodge their objections. The court hears the application at the end of the period and awards the final order, declaring the party insolvent. From that moment on, the debtor’s estate is under trustee management. The process takes around nine to 24 months to be completed but can vary according to the circumstances of the particular sequestration. Certain time limits apply regarding the sequestration process. For one, the notice of intention to sequestrate must be published and circulated in the relevant publications at least 14 days before the hearing for the sequestration application and no longer than 30 days before the stated date of hearing.

How long does it take before one can apply for rehabilitation?

The next question is how long would take before one can apply for rehabilitation. The answer to this question also depends on various factors. If during the insolvency, the insolvent party commits fraud regarding their estate, it will take longer to become rehabilitated than the conventional four years after the final liquidation account has been submitted. If, during the insolvency proceedings, the insolvent party fails to cooperate with the curator and tries to hide assets, the curator can decide not to grant permission for the application to be rehabilitated after the four years have passed. If the insolvent party cooperates, does not enter into credit agreements without permission from the trustee or curator, and manages their financial affairs responsibly, the answer is four years.

If the insolvent party never applies for rehabilitation, the insolvency lasts ten years. The rehabilitation then takes place automatically without the party having to apply for it. It is thus difficult to state exactly how long the insolvency process takes or how long the insolvency lasts. It depends on various factors. In the case of insolvency of a natural person, on the question of how long it would take before the person can apply for rehabilitation if the party was sequestrated before, the short answer is four years since the date of sequestration and three years since the date of confirmation of the firs liquidation account.

Insolvency – how long does it take for voluntary liquidation?

In the instance of a business entity, the process of insolvency is called liquidation. It can be rather fast or it can take years, depending on creditor opposition and the complexity of the business. Unlike with sequestration, the application for the provisional order for voluntary liquidation can be brought to court without notifying the creditors first. A company can be liquidated quickly if it does not have many assets, but if the asset profile is extensive, the winding up process can be lengthy.

Get Legal Guidance on Insolvency and Rehabilitation Periods

The periods of insolvency vary before application can be made for rehabilitation, based on whether the creditor claims have been proved, whether the insolvent party has cooperated with the curator, whether the party has been involved in fraudulent activities, or has been sequestrated before. As can be seen from the above information, the timeframe for insolvency and rehabilitation depends on various factors. It is thus best to discuss your situation with our attorneys, who will be able to advise you on the expected timeframe, depending on whether it is for a business or natural person.

 


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 – May 2018.

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