In layman's terms, declaring bankruptcy implies the following:
You are bankrupt or insolvent if your liabilities exceed your assets. This is a valid reason to file for bankruptcy, also known as insolvency, surrender of estate, and sequestration.
Famous people who also declared bankruptcy
During the 2016 US presidential race, US President Donald Trump famously declared bankruptcy four times in his lifetime, a fact that Hillary Clinton enjoyed making fun of. Bankruptcy is a
legal remedy in South Africa as well. However, the process of declaring bankruptcy can be challenging and expensive.
When do people usually contemplate declaring bankruptcy?
When a person applies for bankruptcy or sequestration, it usually indicates that their liabilities are greater than their assets. When a company or individual cannot pay all its creditors, they file for bankruptcy.
How effective is declaring bankruptcy towards becoming debt free?
Declaring bankruptcy is an effective way to get back on track towards a debt-free future and start afresh financially if you are overwhelmed with personal debt. Because the debts are written off. However, this should only be contemplated as a last resort, once all other alternatives have been thoroughly explored.
What exactly is bankruptcy, then?
Bankruptcy proceeding involves a court-order that an individual is incapable of repaying their debts. If you're unable to pay your bills, you have two options:
Voluntary Sequestration
Filing for bankruptcy involves petitioning the court to accept the surrender of your estate for the benefit of your creditors. Another name for this procedure is voluntary sequestration.
When will the court grant the sequestration application?
If the courts find that this approach is best for your creditors, they'll simply grant it. In practice, this means that your creditors will receive an average of 10–25 cents per rand that you owe once your assets are distributed among them.
What will happen to my assets?
Your assets will be entrusted into the hands of the master and the appointed trustee during the legal process. The trustee will oversee your finances and take actions to convert your assets into cash that will be used to pay off liabilities with creditors.
Different forms of rehabilitation after sequestration
There are different ways of applying for rehabilitation after declaring bankruptcy in terms of the Insolvency Act.
1. Statutory Rehabilitation – 10 years from date of declaring bankruptcy.
2. 6 x months from date of sequestration.
3. 6 x months from date of confirmation of the Insolvent Estate by the master.
4. 1 x year from date of confirmation of the Insolvent Estate by the master of the high court.
Date of Sequestration:
This means the date on which your application for insolvency / bankruptcy / sequestration have been granted in the High Court of South Africa. Meaning the court date on your court order.
Statutory Rehabilitation
Automatic rehabilitation also known as statutory rehabilitation will take affect once the ten years following the approval of your bankruptcy application have passed. You will be deemed "rehabilitated" and no longer subject to the legal ramifications of your bankruptcy, including restrictions on your ability to enter into contracts and trade.
Six months from date of sequestration
A court application can be brought to apply for rehabilitation six months from date of sequestration of no claims were proofed against the insolvent estate. Six months from date of confirmation of the Insolvent Estate by the master. If there were claims proofed against the insolvent estate and the estate have been finalised and confirmed by the Master of the High Court and these claims were paid with interest, the insolvent can apply for rehabilitation after sequestration.
One year from date of confirmation of the Insolvent Estate by the master
If there were claims proofed against the insolvent estate and the Insolvent estate have been finalised and confirmed by the
Master of the High Court and these claims were paid without interest, the insolvent can apply for rehabilitation after sequestration.
How can I benefit from declaring bankruptcy?
All debts will be included in the court application when you file for bankruptcy, even if they weren’t listed in the list of creditors. Declaring bankruptcy stop all legal action and curb legal collection fees and disbursements in the collection process. All creditors have to proof their claims against the insolvent estate and if they don't submit a claim the total debt of that creditor will be written off.
NO MORE DEBT COLLECTOR HARRASSMENT
Declaring bankruptcy will put an end to debt collection processes and harassment from creditors. In declaring bankruptcy, you will
NOT lose your movable assets.
What about my house?
It’s crucial to realise that because you're declaring bankruptcy, you will lose any immovable property in the insolvent estate whether you owe money on it or not.
Will I lose my vehicles when declaring bankruptcy?
There're various things to take into consideration when answering this question:
Vehicles on Finance agreements:
If you have any vehicles that are on hire purchase, that you're still repaying, you will lose these vehicles in the insolvent estate.
Paid up vehicles:
If the vehicles are paid in full you will have to opportunity to buy it back from the insolvent estate and will not lose the vehicles.
Vehicles on a Lease Agreement or rent to own agreements:
If the vehicles are bought on a lease agreement or a rent to own agreement, you will be able to keep paying the vehicles and won't lose it in the insolvent estate.
Declaring Bankruptcy in South Africa
The following procedures must be followed in South Africa to file for bankruptcy:
• Apply for voluntary sequestration with the High Court.
• Explaining your financial circumstances and reasons in an affidavit to the High Court.
• Advertise your voluntary sequestration application in a newspaper.
• Notify creditors of your intention to Apply for Voluntary Sequestration.
• The registered valuator will do a valuation of all the assets.
• The Master of the High Court will appoint a trustee/s to take charge of the insolvent estate.
The advantages and disadvantages of declaring bankruptcy.
It is important to consider the advantages and disadvantages of declaring bankruptcy in South Africa before using it as a debt solution.
Advantages of declaring bankruptcy:
• Up to 80% of your debt will be written off.
• In the long term it is the most affordable way to rid yourself of debts.
• It is the quickest way to rid yourself of debts.
• Creditors will no longer be able to pursue you directly for the debts.
Disadvantages of declaring bankruptcy:
• Bankruptcy will negatively impact your credit score.
• A rehabilitation order is necessary to clear your name from Insolvency. .
Is it advisable to declaring bankruptcy if you're over-indebted and have no other debt relief solution available?
YES, YES, YES.
It is the only way you will be able to get back on your feet once again and regain your financial freedom sooner rather than later.
Wise words...
It is crucial that you
seek adequate professional assistance before declaring bankruptcy.
