Voluntary Sequestration as an Alternative to Other Approaches in Dealing with Debt Issues

Voluntary sequestration is an effective legal means to get rid of up to 80% of your debt in one go, and to become completely debt-free within a relatively short period. Many other approaches are followed, but be careful about such methods. Avoid the following means to address debt, as you will only end up with more debt, and may even face compulsory sequestration as a result.

 

Borrowing Money from Your Retirement Savings or Pension Fund

You play with your future if you use your retirement fund money to pay off debt. What if you lose your job now and end up with no retirement fund money to be paid out? Borrowing from your employer or your own retirement fund means you will have to repay the amount, which also means less money to take home. With less money available, you are more likely to use credit to pay for consumables, and can end up in a situation where a creditor applies for compulsory sequestration of your estate.

 

Getting a Second Loan on Your Home

If you have made bad debt with your credit card and store accounts, never use a second loan against your house to pay off the debt. Non-payment and late payment of credit accounts lead to a poor credit rating. The debt is unsecured, but now you secure it with a mortgage against your house. Instead of having unsecured debt, you now sit with more secured debt, and this means you will lose your house in the process if you are unable to pay. To top it off, you will end up with a bad credit rating, and may still have additional debt to pay off even if the bank forecloses on the mortgage.

 

Using a High Interest Debt Consolidation Loan

You will notice numerous ads on the Internet stating that debt consolidation loans are the answer to your problem. Here is the true problem: if the company approaches your creditors to find out which amounts are owed, the creditors already know you are in financial trouble. If the company takes a while to make the consolidated payment on each account, you build up a poor credit score in the meanwhile. It can take years to get your credit score on an acceptable level. Unless you take out a loan that can cover the full amounts owed to the various creditors and pay them directly, debt consolidation loans should not be used.

In addition, many loans come with high interest rates, and keep in mind that you must be able to afford the monthly instalments. You are not debt-free until you have paid off the loan. With some of the creditors off your back, you may be tempted to once again use the store accounts and credit cards, pushing you further into debt and closer to possible compulsory sequestration.

 

Juggling Between Credit Cards

Do not be tempted to transfer the balance of one credit card to another, newer one because the new one has a low introductory interest rate offering. Unless you are able to pay it off before the interest free period is over, and you are disciplined enough not to use the account and the other credit cards, it is not the way to go.

 

Approaching Debt Review in The Wrong Way

A workable solution as an alternative to sequestration is that of debt review. Note that you must have a monthly income, as you will need to make a monthly consolidated payment to cover all the debts. You cannot miss a single payment, as it will cancel the debt review process. Do not stop payments to the creditors whilst still negotiating debt review, as it will cause you to be three months behind by the time the debt review payments start. This could be the fatal blow to your finances if the debt review negotiations are opposed, and you end up not going under debt review. The creditors will immediately be able to take judgement against you.

 

What Is A Better Solution?

If you qualify as insolvent and have immovable assets, consider applying for voluntary sequestration. With it, you are able to get rid of up to 80% of your debt in one go, with the remainder payable over a few months at no added interest if there is a shortfall. It is a legal process, and once you have published the notice of intention to apply for voluntary sequestration, you will stop all payments to creditors. No creditor can demand payment in the period, and must wait for the court to award sequestration. Your estate is surrendered, and a trustee is appointed to oversee the sale of assets and distribution of benefits to the creditors. Once the process of sequestration is complete, you can apply for rehabilitation if all requirements are met.

Take the responsible step in dealing with your debt. Make an appointment with our attorneys to discuss voluntary sequestration as a solution to your debt problem.

 


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.

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