DEBT REVIEW VS SEQUESTRATION

Debt review vs. sequestration is an age-old conundrum that over-indebted people face on a daily basis. This is a complex question with a large response. 

The best course of action for anyone interested in either of these processes, debt review or sequestration, is to consult with a debt relief specialist like Cure Debt. Cure Debt is well-versed in all debt relief solutions permitted by South African law, and we will be able to provide you with the best advice and explanations on debt relief solutions in South Africa. And more specifically, debt review vs. sequestration.

An Introduction to Curing Debt
Cure Debt is the only company in South Africa that offers all debt relief solutions under one roof. We take pride in our understanding of every debt relief solution available under South African law. We're also registered with the National Credit Regulator. With an outstanding track record, you can't possibly go wrong. Choose the best in the business: Cure Debt.

Do you understand the difference between debt review and sequestration?
Life isn't always easy. When creditors threaten with judgements, home foreclosures, and repossessing your vehicle, it can be challenging to overcome. What is the most suitable choice? Keep reading to find out how debt review differs from sequestration. Knowing what each consists of will help you make the right choice for your specific financial situation.

What is a Debt Review?
It is a process in which a debt counsellor evaluates your financial situation. Accounts and financial liabilities that qualify are combined into a single monthly installment, offering reduced interest. Instead of paying each creditor separately, you pay a lower monthly total. The sum is then distributed among the creditors by the payment collection and distribution agency.

A little bit about the Debt Review Process...
The debt counsellor first negotiates lower interest rates and monthly payments with each of the creditors. The court confirms the final, agreed-upon payment amounts. You are then officially under debt review, and a debit order for the amount to be paid and distributed among creditors is set up against your bank account. 

Once all accounts have been settled, the debt counsellor will issue you a clearance certificate. This can only be issued after each of your creditors confirms that the amount owed to them has been paid in full. This clearance certificate acts as confirmation that you do not owe any money to creditors.

What is Sequestration / Insolvency / Bankruptcy?
It is a legal process in which creditors seek to have the court declare you bankrupt.   This kind of sequestration is known as Compulsory Sequestration. You can also apply for Voluntary Surrender of Your Estate, which results in a Voluntary Sequestration application. 

In effect, your financial estate is declared bankrupt and placed under the care of the Master of the High Court until a trustee or curator is appointed to manage the sale of assets and the distribution of the proceeds to creditors in accordance with their status.

This technique will get you debt-free in a couple of months. However, if you don't want to buy it back from the insolvent estate, you will lose your movable assets in the process. Your debts will be written off and you will start living a debt free live in a matter of months.  

Is it even possible for debts to be written off, and is it legal?
How is this possible? The process requires a minimum of 20–25 cents out of the rand to be paid on each of the amounts owed. The payment comes from the sale of your assets at auction, or alternatively, the insolvent buys these assets back from the insolvent estate. Once sequestrated, you are formally bankrupt until you apply for rehabilitation after sequestration.

If you do not apply for rehabilitation, you will be insolvent for ten years. Whereafter, you will be automatically rehabilitated without a separate court application for rehabilitation after sequestration.  

However, you can apply for rehabilitation as soon as the insolvent estate has been dealt with, and in some instances, even prior to the estate being finalised.  As long as you adhere to the rules and regulations stipulated in the Insolvency Act.  

In general, it can take anything from six months from the date of sequestration to approximately four years from the date of sequestration to qualify for an application for rehabilitation. Get a debt relief specialist to assist you with this evaluation.

SEQUESTRATION VS DEBT REVIEW HAVE A FEW THINGS IN COMMON
No More Legal Action: 

You are protected against future legal action from creditors.  When it comes to debt review, you are protected once you have entered debt counselling.  Sequestration begins once your intention to Voluntary Surrender your Estate to the Master of the High Court, is made public thirty days prior to the court date, as per the Insolvency Act.

No New Debts:   

With debt review and sequestration, you are unable to enter into credit agreements throughout the term.

Debt review lasts until you acquire the clearance certificate, which can only be released once all the debts are paid in full. In sequestration, you may still enter into a credit agreement with the trustee's written consent.

Your Credit record will be adversely affected and therefor you will be listed as 'Under Debt Review' and 'Insolvent' dependent on the process you chose to follow.  

6.

Debt Review Clearance Certificate 
Once you get a clearance certificate, you will be able to rebuild your credit score and partake in the economy once again.  The status 'Under Debt Review' status is removed from your credit report, and you can start over with Zero Debt.

Rehabilitation changes the status from sequestrated to rehabilitated.  You'll have to rebuild your credit score once again because you were insolvent and a high-risk client.  Therefore, now that the estate has been finalised you will start a fresh with no debt but also with no credit score.  

Debt Review: Advantages.
Here are some of the advantages of debt review:
1. Consolidated monthly payments with lower interest rates.
2. Protected from creditors.
3. A way to pay off debts at affordable monthly consolidated amount without facing legal action.
4. No asset loss.  You will not lose your immovable or movable property.  
5. Ability to keep service agreements, like vehicle finance. 
6. Discrete process without employer notice.

Sequestration: Advantages.
Sequestration offers the following advantages:
1. Achieve debt-free status quickly—a lot quicker than debt review.
2. Freeze interest.
3. Protect against creditors.
4. Apply for sequestration even if under debt review.
5. Write debt off.
6.  Insolvency attorneys can negotiate asset buybacks (e.g., furniture and firearms)
7. Protect pension and personal injury claim income.
8. Remove garnishee orders from your salary.

9. Stop all payments to creditors once the notice of intention to voluntary surrender your estate is published.

What are the disadvantages of debt review?
The negative consequences of debt review are:
1. You must continue paying until all outstanding amounts plus interest and admin costs are paid in full.
2. Creditors can oppose the application.
3. You are unable to enter any credit agreements.
4. Not all credit agreements qualify.
5. Managing payments might be challenging.
6. It can take years before all the debt is settled.
7. Your credit record has been flagged.

Sequestration Disadvantages
1. Entering any credit agreement requires written consent from the trustee or curator.
2. While under sequestration, you cannot act as a director or member of a company registered at CIPC.
3. Your credit report indicates that you are sequestrated.

In Conclusion:
Debt Review vs. Sequestration: Both of these processes have very comparable positive and negative features, but when it comes to time frames, sequestration is a faster approach to getting out of debt and more cost-effective in the long run. 

However, debt review is ideal for clients who do not want to lose their immovable property or vehicles that are still under finance. It is always preferable to consult with a professional debt relief specialist to ensure that you receive the best possible advice for your particular circumstances.  

Because of the complexity of these two processes, you will need professional advice to fully understand the positive and negative attributes of both Sequestration and Debt Review. 

Finding a Debt Relief Specialist: PLEASE HELP!