How to Apply for Rehabilitation After Insolvency

If you are sequestrated, you are declared insolvent. Your estate is under sequestration until you have been rehabilitated. Rehabilitation after insolvency is automatic after a period of ten years if you do not apply for it earlier. However, ten years is a long time to not have control over your financial affairs. It is thus recommended that you apply for rehabilitation after insolvency as soon as legally possible and within your means to do so.

 

Who Is Eligible for Rehabilitation After Insolvency

The insolvent party, a duly authorised agent of the party (if the insolvent party is not living in the country), or the widow/widower of the insolvent (if they were married in community of property) can apply for rehabilitation of the insolvent party after sequestration. The executors of the insolvent’s deceased estate and the former spouse of the insolvent (if they were married in community of property) can also apply for the insolvent party’s rehabilitation.

 

When One Can Apply for Rehabilitation After Insolvency

The application can be brought to court once the creditor claims and cost of sequestration have been paid, or when the insolvent has submitted an offer of composition that has been accepted by 75% of the creditors (in terms of both number and value), and the insolvent has given the necessary security or has made payment on the composition. An application for rehabilitation after sequestration can also be made within six months if no claims have been submitted and proved against the estate, provided that it is the first time that the applicant has been insolvent and that the applicant has not been convicted of certain types of offences.

An application can be made for rehabilitation after 12 months from date of confirmation of the first trustee’s account, provided the applicant has not been sequestrated before and has not been convicted of certain offences to date. The application can be made after 36 months from confirmation of the first trustee’s account if the insolvent party has been sequestrated before, provided the insolvent has not been convicted of certain offences to date. The application can only be made five years after the date if the insolvent has been convicted of certain offences up to the date of the application.

 

The Application Process

The applicant must, with the help of an attorney, apply to the High Court of South Africa for rehabilitation after sequestration. The court must have jurisdiction over the area where the insolvent party stays. The court provides a provisional rehabilitation order and the matter is postponed for about 30 days. On the return date, the application is granted and a final order issued if no objections have been lodged against it. The applicant’s attorney drafts the affidavit and the applicant signs it. Once this is done, the documents are submitted to the court, where a case number and date are set. The applicant does not have to appear in court as the application is made via the affidavit.

Before the application is brought, the attorneys of the insolvent party give notice of the applicant’s intention to apply for rehabilitation after insolvency. This notice is published in the Government Gazette and submitted to the Master of the High Court. Permission is obtained from the estate trustee or curator for the application. The curator can object to the application if there were problems with the estate. It is thus important for the insolvent party to cooperate with the curator throughout the sequestration process and insolvency period to avoid this.

 

What Rehabilitation Means

It effectively ends the insolvency. All the debts are discharged. The insolvent party does not have to pay any such debts incurred up to and until the sequestration date. However, the insolvent party must pay any debts incurred after sequestration. Note that an insolvent party may not incur debts without the permission of the appointed trustee/curator. The insolvent party’s legal status changes to “rehabilitated” and the “sequestrated” notice on the party’s ITC record is replaced with “rehabilitated”. This stays so for a period of five years, after which it is removed. All judgments listed at the credit bureaux are removed, but in many instances, it is necessary to arrange for ITC clearance.

Get in touch with our attorneys to assist with rehabilitation after insolvency.

 


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 – April 2019.

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