What is Debt Solution? Voluntary Sequestration as the Unexpected Answer

What is debt solution? Other than it being a way to address debt, how is it a solution? If the question does not make sense, read on as we explain it below.

A debt solution is basically an approach to eliminate, reduce, or manage what you owe to others. What you owe to a creditor is your debt. If your debt is more than you can pay, then you have a problem and must seek a solution. You can either negotiate with the creditor to pay off the debt over a longer period or borrow money from another person or institution to pay the debt. But, if you make more debt to pay debt, what is the debt solution?  Unless the debt consolidation loan is big enough to cover all your debt, enabling you to pay the loan, then what is the debt solution in it?

For something to be a true debt solution, it must help you to get rid of your debt. Simply restructuring payments and juggling between accounts to keep you from drowning is not a solution. Indeed, you most probably stress about the situation daily. A workable alternative is one in which you can get rid of up to 80% of your debt in one go.

 

Is Such A Debt Solution Even Possible?

The answer is yes. It is called voluntary sequestration, and here is why you should give it another thought. With voluntary sequestration, you apply to court to be declared insolvent. Your creditors cannot take any other legal action against you. This means you can sleep at night knowing that the creditor harassment stops. The debt is frozen in the sense that there cannot be added interest. You thus stop the cycle of just paying interest without ever paying off the amount.

Garnishee orders against your salary are cancelled. Your assets become part of the insolvent estate. A trustee is appointed to oversee the sale of assets and distribution of benefits to the creditors.

 

How Is it a Solution?

Though you do lose assets in the process, it is the only debt solution that enables you to become completely debt-free. You can get rid of up to 80% of your debt and the other 20% is covered by the sale of assets. Accordingly, the sale of assets in the insolvent estate must realise sufficient funds to ensure that creditors can receive a minimum of 20 cents out of the rand. This means that your assets are sold and the benefits are distributed to the creditors. They cannot make more claims against the estate.

No other debt solution makes it possible for you to pay only a part of the debt owed. Once the sequestration process is complete, you are debt-free and can start fresh.

With no more debt payments, you have enough free income to rebuild your financial estate. Whereas you may have paid R35 000 out of your R40 000 net income per month to creditors and may have struggled just to keep fuel in the vehicle and food on the table, you have the entire R40 000 to pay for living expenses, save up, invest and rebuild your financial estate. You can apply for rehabilitation as soon as requirements are met. Once rehabilitated, you have full control over your financial estate and can enter into credit agreements without the written permission of the trustee.

So, let us get back to what is a debt solution? The answer is that it is a method that enables you to become debt-free. Voluntary sequestration is thus a workable debt solution. You can voluntary sequestrate without property. To this end, we recommend speaking to our lawyer team about the requirements and process for voluntary sequestration with or without immovable property.

 

 


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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