Life can become so overwhelming and so stressful that it is hard to know where to start. You spend your days juggling a million tasks and responsibilities. Things never seem to get done, and liabilities keep piling up. This is when you ask: “What are the advantages of filing for bankruptcy?”

It is a solid start. Without you facing the problem, there cannot be a solution. You are just one step away from a meltdown, until you realise it is time to take action. But what should you do first? To help you get started, we answer the question: “What are the advantages of filing for bankruptcy?”


Voluntary Sequestration is the Answer and Holds Several Advantages

Filing for bankruptcy is the best way to get out of the mess if you have exhausted all other options and it has its advantages. Put your finances in order and start fresh by erasing up to 80% of your debt. No more juggling payments or dealing with creditor harassment.


Let us explore what some of the advantages are of filing for bankruptcy:

  • You start fresh with a new financial estate.
  • You receive a new tax number.
  • Up to 80% of your debt can be written off.
  • You stop creditor harassment.
  • You can rebuild financial wealth.


  1. Start Fresh with a New Financial Estate

After filing for bankruptcy, your insolvent estate is placed under the care of the Master of the Court until the appointment of a curator/trustee. Once appointed, the curator/trustee oversees the sale of assets and distribution of benefits to the creditors. When the process is complete, you receive a new financial estate. This estate is unencumbered by debt. What does that mean? It means you are debt-free.


  1. You Receive a New Tax Number

Part of falling behind with debt payments often entails a backlog on payments to SARS. The good news is the money you owe to SARS also forms part of the surrendered estate. SARS is a preferred creditor. When you file for bankruptcy, SARS is notified. If you qualify and the sequestration is awarded, then proceeds from the sale of assets are also used to pay your debt to SARS. You then receive a new tax number, enabling you to start on a fresh slate with SARS as well.


  1. Up to 80% of What You Owe is Written Off

Voluntary sequestration does not mean you do not have to pay your debt, but it enables you to do so fast. Your assets may not be enough to sell and pay off all debts. However, with sequestration, the proceeds of sale should cover at least the minimum benefits of 20 cents out of the rand, the legal costs, and the trustee/curator costs. It implies not having to pay 100% of the debt total.

If you owe R10 000 to a creditor, then the creditor must receive at minimum 20 cents from the rand, which is R2000 from the R10 000. With it, R8000 can be written off, enabling you to wave farewell to a large portion of your debt instead of paying for years to come. The remaining 20% is covered through the sale of assets.


  1. Stop Creditor Harassment

debt rehabilitationInstead of applying for your sequestration, creditors may take judgment and collect your assets. You end up paying for years, losing assets in the process, and suffer a poor credit record. Unpaid judgments stay on record for up to 30 years. This can severely hinder your ability to rent a house, buy a car, or regain financial stability.

Filing for bankruptcy enables you to stop judgments in their tracks. The creditors must deal with our insolvency attorneys. They have to wait for the process to take its course before they receive their benefits. Once the intention to file for bankruptcy is published and the creditors notified, they cannot demand payment (one of the biggest advantages). The creditors are treated as a collective. What you need to do is stop all payments to them. This gives you an opportunity to save up money to make provision for a shortfall, to get a deposit together to rent a home, etc.


  1. Rebuild Financial Wealth

You can apply for rehabilitation as soon as soon as the time and specific requirements for rehabilitation are met. This enables you to rebuild your credit record. Even before then, you have your entire monthly salary or income to save up, pay for living expenses in cash, and regain financial stability. With debt hanging over your head, you end up paying high interest rates and juggling between accounts to make ends meet. Once debt-free, as possible with voluntary sequestration, you can focus on using income to build a strong financial estate.


To Wrap Up the Advantages of Filing for Bankruptcy

We hope we have been able to provide clarity on the question: “What are the advantages of filing for bankruptcy?” When you are ready to start fresh or need an immediate protection against debt collection, voluntary sequestration is your answer. Get back on track and make progress in rebuilding financial wealth.


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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