Do You Meet the Voluntary Sequestration Requirements?

The Insolvency Act of 1936 and its amendments govern the process of voluntary surrendering one’s estate and the application to be declared bankrupt. In order to make use of voluntary sequestration as a debt-management solution, certain requirements must be met, which are briefly discussed below.


Liabilities Must Exceed Assets

The High Court of the country must be satisfied that all sequestration requirements are met. To this end, the applicant must be able to prove insolvency. As such, the applicant’s liabilities must exceed their assets. The applicant must thus be balance-sheet insolvent. This means the applicant must owe more money than can be covered by their assets.


Inability to Pay Debts When Due

Another one of the sequestration requirements is that the applicant must be unable to pay debts when due. As such, the debtor must be cash-flow insolvent.


Sufficient Assets to Ensure Minimum Benefits to the Creditors

Even if the mentioned sequestration requirements are met and the assets in the surrendered estate are not sufficient to ensure that the sale thereof on auction by the trustee/curator can provide for a minimum benefit of 20 cents out of the rand to the creditors, then the application will be rejected. If the minimum dividend payable cannot be realised from the sale of assets, then the applicant must be able to pay such over a specified period or in a cash lump sum.


Enough Funds to Carry the Cost of Estate Surrendering

The sale of assets must realise enough funds to carry the cost of estate surrendering, including the court proceedings, legal fees, and trustee/curator fees. If not, then the applicant must be able to pay the relevant costs.


How to Determine if You Meet the Sequestration Requirements

The first step is to list all creditors and the total outstanding for each. Also, list all assets and the value of each. In addition, list monthly income and expenditure. Call on our attorneys to help assess your financial affairs. If you meet the minimum requirements, we will commence with the application.


What is the Statement of Affairs?

One of the requirements for the application is the drafting of a statement of affairs. This is done by our attorneys based on the information you supply. The information includes a full list of creditors, contact details for each (phone, email, street, and postal addresses), and the total debt outstanding for each. Also, note the monthly instalments and the outstanding balance. You must, furthermore, provide a reason for each of the debts, such as rent, personal loan, credit card, vehicle finance, home loan, furniture purchased, etc.

Supply information regarding the security offered for each of the debts as relevant. This is important, as the law makes a distinction between secured and unsecured debt. This will also affect the distribution of dividends to the creditors.


What is the Founding Statement?

You must draft a founding statement. Our attorneys will do so on your behalf. This statement provides a brief explanation of the reasons for the debt and financial problems, why you file for bankruptcy, the level of indebtedness and, a few legal aspects.


Signing of the Affidavit

You must sign the statement of affairs and founding statement affidavit in front of a Commissioner of Oaths.


Notification to Creditors

It is extremely important to list all the creditors, as we need to inform them of the intention to apply for voluntary sequestration. We do so by means of a notice published in the government gazette, local newspapers likely to be seen by the creditors, and hand delivery or registered mail to the creditors. Once the notices have been published, you are protected against further legal actions from the creditors. You must stop all payments to the creditors.


Meeting and Cooperation with the Trustee and Creditors

Where you are required, once sequestrated, to meet with the trustee and creditors, it is imperative that you give your cooperation. The trustee must, at the end of the day, provide permission before you can be rehabilitated. If you fail to attend the meetings or to cooperate throughout the sequestration process, it will affect the chances of the earliest possible rehabilitation.


What to do Next?

Make the list of creditors, monthly expenditures, totals owed, and income, as well as a list of assets. Note which debts have been secured by collateral. Get in touch with our attorneys to help determine whether you meet the minimum sequestration requirements.


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 to the date of publishing.

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