How Does Voluntary Sequestration Help to Get Rid of Debt in South Africa?

Realising that you have a debt problem is the first step towards financial freedom. The next step is to consider your options. Voluntary sequestration is suitable if you have considerable debt, are unable to pay the debt without causing more debt, or have to juggle between accounts to do so. You must thus be insolvent to qualify for voluntary sequestration.

In addition, you must have sufficient assets and/or income to ensure that the sale of your assets on auction by the trustee will realise sufficient funds to pay for the voluntary sequestration, and provide for the minimum benefit to the creditors.

Debt counselling is the better option if you do not have sufficient assets, and your debt can be repaid within five years if you undergo debt review. A debt consolidation loan is a suitable option if you can qualify for it, and can be sure that it will be sufficient to cover all your debts, and you will be able to afford the monthly payback of the loan. For this option, you will need exceptional self-discipline, since any additional debt made during the repayment period can push your finances over the edge, and cause you to become bankrupt.

 

What is Voluntary Sequestration?

It is a legal process whereby the insolvency attorney applies to court, on your behalf, for you to be legally declared bankrupt. For the application to succeed, you must be insolvent, and must meet the requirements as stated earlier.

 

What Happens During the Voluntary Sequestration Process?

Once the court approves the application, your estate is surrendered, and the court-appointed trustee takes over the estate. The trustee is responsible for selling the assets, and ensuring fair distribution of the proceeds to the creditors once the administration costs of the sequestration have been paid.

The voluntary sequestration order means that the creditors can no longer take any legal action against you. The creditors must claim from your surrendered estate. You will not have to deal with the creditors, as they must speak to your attorney and the trustee. The creditors are handled through a collective process. The interest on the debt is frozen, and no creditor can demand separate payment.

The assets in your surrendered estate are noted and valued. The sale of assets takes place at an auction, and the benefits are distributed to the creditors who must, at minimum, receive 20 cents out of the rand each. You can thereafter start fresh.

 

How Does It Affect You?

Your employment status is not affected, unless you hold a specific government or financial position, best discussed with our attorneys. You will not be able to fulfil the role of director of a company during the time of sequestration, but can do so again after rehabilitation. Your furniture is not removed from your home, though written up. In most instances, the attorneys are able to negotiate buy back from the estate at the low auction value price. You can thus keep your furniture.

Your tools of trade will not be removed, and your children’s assets will be safe. When it comes to your firearm, the same procedure as for furniture can be followed. In most instances, the trustee will not want to take possession of the weapon for storage and sale because of the strict legislation regarding firearms that make it difficult to store and to sell the weapon to another party.

You will lose your house, but will have sufficient time to find a new abode and move out. Your vehicles, if still under finance, will be repossessed. You will still be able to rent property, earn an income, and open a bank account. When it comes to credit agreements, you will require the permission of the trustee to enter into any such agreements.

 

Rehabilitation

You can apply for rehabilitation after the relevant period has lapsed and all the requirements have been met. If you do not apply for rehabilitation, you will automatically become rehabilitated after a period of ten years, though it is certainly not recommended to simply wait the period out.

 

Where to Get Answers

You most probably have many more questions. Fortunately, our legal team has the answers, and will explain the costs, duration, process, advantages, and disadvantages. Make an appointment or give us a call to help you apply for voluntary sequestration as a means to get rid of your debt in South Africa.

 


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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