Trouble with Creditors: What Are Your Insolvency Options?

If your liabilities exceed your assets and you are unable to pay debts when due, you are insolvent. At this stage, it is important to consider your insolvency options and how such affect your financial status.

 

Sell Your Assets

Should you have sufficient assets to sell and cover the debts, it is one of the better insolvency options. In this way, it is possible to avoid the legal costs associated with voluntary sequestration. Moreover, you can carry on as a director of a company or close corporation member. It also does not affect your spouse’s assets if you are married out of community of property.

 

Debt Consolidation Loan

Another one of the insolvency options is to apply for a debt consolidation loan. This is only a valid option if you can still qualify, and the loan amount is large enough to cover the debts. Keep in mind that many debt consolidation loans come with hefty interest rates, which may cause you to default on the loan a few months down the line. At that stage, you may again have to consider your insolvency options.

 

Borrow Money From a Friend or Pawn Your Vehicle

Perhaps a family member or friend can lend you the money to pay most or all the debts. If this option has already been exhausted, you can pawn your vehicle to pay off debts. In most instances, the pawn-your-vehicle loans entail high interest rates, making it difficult to pay back the loans.

 

Undergo Debt Review

This brings us to debt review as one of the insolvency options. It is viable if the debt can be repaid within five years if under debt review. It is also viable only if you have a monthly income, as the debt counsellor will negotiate for lower interest rates and monthly instalments. Debt review is a legal process, and if awarded, the creditors cannot take further legal action against you. You do not lose any assets in the process, and once the debts are paid, you receive a debt clearance certificate.

During the period of debt review, you may not enter any type of credit agreement, and must make sure that you do not miss a payment. One late or missed payment can result in the creditors having the right to cancel the agreement and initiate legal action against you.

 

Apply for Voluntary Sequestration

If your debt is far more than can be paid back within five years if under debt review, then you have to consider the final solution. It is called voluntary sequestration, and involves an application to court to have your estate surrendered. If successful, you are declared bankrupt. Once the attorneys publish the notice of intention to voluntary sequestrate and the creditors are notified, you are safe from further legal proceedings by creditors.

All garnishee orders against your salary are cancelled. The creditors must deal with the attorneys and all interest on the debts are frozen. Moreover, all creditor actions are stayed pending the outcome of the court decision.

It is a fast and efficient way to get rid of up to 80% of your debt in one go. Keep in mind that you may not be a director of a company or close corporation member while under sequestration. Once all requirements are met, you can apply for rehabilitation, and if awarded, regain full control over your financial estate.

Even if you are under debt review, you can still apply for voluntary sequestration. If you have reached a point where there is no time or viable insolvency options, do not wait for the creditors to take everything. Get immediate legal help to apply for voluntary sequestration. Give us a call for more information and assistance with the process.

 


Disclaimer: This article is for information 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 as at the date of publishing.

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