Debt Solutions and Voluntary Sequestration to Manage Your Financial Problems

If your debt situation has become unmanageable, you need to take action to regain control. Voluntary sequestration is a workable solution, but if you want to consider pre-insolvency solutions first, read on.

 

Voluntary Distribution

Talk to insolvency attorneys to help you come to an agreement with your creditors in which you enter a voluntary distribution arrangement. Accordingly, you tender a specific and pre-agreed amount of money to the attorney offices monthly. The attorneys subtract their fee for handling the voluntary distribution according to the power of attorney that you sign. They then distribute the remainder of the amount as instalments on a pro-rata basis, directly proportional to the size of each creditor’s claim. Do not attempt to approach creditors directly to arrange for lower amounts, as this constitutes an act of insolvency and can lead to a creditor applying for compulsory sequestration of your estate.

 

Moratorium

With a moratorium of creditors, you negotiate with the creditors to stay their claims. This can be done when you expect to receive a large sum of money that can be used to pay off all the debts. This approach should not be followed without the assistance of insolvency attorneys. If the creditors do not agree or do not want to cooperate, they can apply for judgments against you and have your assets attached. They can also apply to court for your sequestration, based on the fact that you commit an act of insolvency. It is a risky approach and unless you expect and have the assurance of a large sum of money to cover all the debts, it is best to consider other options.

 

Debt Review

You can apply to be placed under debt review. Once again, do not attempt to do so without first speaking to insolvency lawyers. Once you are under debt review, you pay a consolidated monthly amount, which is distributed according to a court order among the creditors. With this option, the creditors cannot take any further legal action against you as long as you continue to pay off the debt monthly. It is a suitable solution if you do not have immovable property and do not want to lose any of your assets. Keep in mind that you may not enter into any credit agreements during the period that you are under debt review. It is worth considering if the debt you owe can be paid off within five years while under debt review. Once done, the ITC records no longer have the “debt review” flag and you can once again enter into credit agreements.

 

Administration

If your debts are below R50 000, you can apply to court to be placed under administration for the debt. With this solution, you pay each of the creditors a set and agreed-on amount of money pro-rata every month. There is a risk that you can stay under administration for a long time.

 

Voluntary Sequestration

As one of the fastest methods of getting rid of up to 80% of your debt, voluntary sequestration can only be done with the help of attorneys. With this process, you apply to court to be declared bankrupt. Once the intention to apply for voluntary sequestration has been published, the creditors can bring their objections to the attention of the court. However, they cannot take legal action against you and interest is frozen. You immediately cease all payments to creditors to avoid benefitting one creditor over another. A curator is appointed to oversee the sale of assets in your estate. The proceeds are used to pay the voluntary sequestration costs and to ensure that each creditor receives at minimum 20 cents out of the rand. Once all claims have been paid, the first trustee’s account is prepared and submitted to the Master of the Court. If the time limit and all requirements are met, you can apply for rehabilitation. Once rehabilitated, you have full financial control over your estate.

Keep in mind that, if there is a shortfall in the benefits of the creditors, you have to pay this. This can be by means of a lump sum or down payment over a period of 18 to 24 months. Speak to our insolvency attorneys about pre-sequestration options and voluntary sequestration as a means to address your debt problems.

 


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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