If you have a substantial amount of unpaid debt and find yourself struggling to make ends meet, it is worthwhile to consider voluntary sequestration (or voluntary surrender).
In doing so, you can substantially lower your debt repayment, and take back control of your finances.
In this article, we will be discussing a few of the most frequently asked questions about voluntary surrender in South Africa.
We hope that this article will help you determine the pros and cons of sequestration to decide whether it might be the right thing to do.
If you have any questions or would like to start the process of debt recovery, Contact Alan Levy Attorneys for more information.
What Is Sequestration and What Does It Mean to Be Sequestrated?
Someone who is sequestrated refers to a person who no longer has the ability to pay their debts, as determined by the order of the court.
Sequestration is the act of legal possession or removing of assets under the process of the law whilst debt is being paid or other claims are being met, in favour of creditors or the state.
How Is a Sequestration Order Obtained?
South African Insolvency Law stipulates that a person can be sequestrated involuntarily (forced sequestration) or voluntarily (voluntary sequestration).
For the purpose of this article, we will only focus on voluntary sequestration.
What Is Voluntary Sequestration?
Voluntary sequestration is the legal process of applying to the court to officially be declared insolvent.
What Is Required for Voluntary Sequestration?
There are several requirements that need to be fulfilled in order to be declared insolvent by a court:
- You have to be insolvent – insolvency refers to the inability to pay your debts as a result of your liabilities exceeding your assets,
- Your assets must be able to cover the sequestration application fees and,
- Proof that the sequestration will benefit creditors – creditors have to receive a minimum benefit of a certain amount of cents per Rand from the proceeds of your sold assets.
Benefits of Voluntary Sequestration
While debt review is by no means a ride in the park, there are several reasons to consider voluntary surrender:
- You can quickly write off a chunk of your debt,
- You will no longer be hassled by constant calls from creditors,
- You will have a clear credit record,
- You are protected from further legal action,
- Assets that are used to generate income also referred to as tools of trade, are not included in the process
Disadvantages of Voluntary Sequestration
Before applying for voluntary sequestration, do your research and consider the disadvantages that you may face:
- You will be blacklisted,
- You will lose your credit-worthy status,
- You will not be able to apply for credit or incur further debt until such time as you are rehabilitated – generally, a court will either declare a person rehabilitated after a handful of years, or automatic rehabilitation will occur ten years from the date of sequestration,
- You may be prohibited from joining certain professional associations until you are declared rehabilitated and,
- You may be prohibited from certain professions.
Conclusion Regarding Voluntary Sequestration
Your circumstances may dictate to you that apply for voluntary surrender.
However, it is not a choice that should be made lightly, but instead, it should be considered when other options are not available.
Remember, this article is a summary only and does not constitute legal advice, of any sort. For legal advise on how to handle your matter, please contact Alan Levy Attorneys.