Since there are several differences between sequestration and debt review, consumers have no idea which is better. During this investigation, we made a comparison between sequestration and debt review. We will investigate these two processes and assist you in understanding both their advantages and disadvantages.
Individuals frequently confuse sequestration with debt review. I became aware of the pervasive misinformation online after reading an article about debt review vs. sequestration. Consequently, I committed to creating a piece that analyses the differences between these two processes.
The purpose of this article is to define the differences between debt review and sequestration, which have both advantages and disadvantages. It also emphasises the benefits that South Africans with excessive debt can enjoy if they choose to follow either of the processes.
This study compares sequestration and debt review.
Debt counselling and sequestration both have a positive impact. Choosing the debt review process consolidates debt payments into a single monthly payment. However, if you opt for the sequestration process, the debt will be written off. You might now say to yourself, "The choice is easy." Sequestration is the answer. If you can write off your debt, who wants to repay it? But in fact, it's not that easy; you need to qualify for sequestration.
How much can I reduce the monthly installment if I choose the debt review process?
Compared to the original credit agreement, monthly debt payments may decrease by 50–60%. Sequestration will eliminate all payments to creditors, except for the application fee.
After you pay the application costs, the sequestration process will allocate 10–25% of the total debt, plus the trustee and master fees, towards the debt. These payments will be interest-free. This is one of the significant differences between sequestration and debt review. In most cases, there is a decrease in interest but not a write-off in the total debt amount. Therefore, once again, sequestration trumps debt review.
If you are the owner of a house, erf, or any immovable property that is registered in your personal name, you will not forfeit the movable property if you choose to participate in the debt review process. Nevertheless, if you elect to pursue the sequestration process, you will forfeit this property, regardless of whether it has been fully paid or if you are still repaying the bond. Debt review prevails over sequestration in this instance.
Ownership of a registered vehicle under a finance agreement will result in its forfeiture if you choose to participate in the sequestration process. As long as you make the payments, a lease or rent-to-own agreement will keep the vehicle secure.
If the vehicle is paid in full, you will not lose it during the sequestration process.
The debt review process allows you to keep your car if your monthly payments are up-to-date. If you're behind on payments, you may lose your car. Consequently, sequestration is the best course of action in this instance.
There are no clear winners this time, your unique circumstances, whether it be sequestration or debt review, will determine the best course of action. In both instances, be it sequestration or debt review, the consumer will have more disposable income available on a monthly basis. However, the time it takes to become debt-free and partake in the economy is much shorter with sequestration than with debt review.
Is it possible for creditors to seize my movable assets?
Both processes safeguard movable assets. However, if you already have a judgement against your name, the debt review process won't shield your assets from the judgement. The debt review process cannot include this account; therefore, sequestration is a better option in this situation. Since all debts, whether legal action took place or not, form part of the sequestration process.
LEGAL ACTION: Any accounts in which legal action has been taken are not included in the debt review process. Nevertheless, the insolvency application includes all debts subject to sequestration. Once again, sequestration appears to be the winner in the debate between debt review and sequestration.
When will my credit score and name be cleared?
Debt Review: If you pay off the debt with interest in full, it will take a minimum of five years. Depending on the settlement status of the debt, the duration may extend beyond five years. In most cases, if the debt is more than R100,000.00, it is longer than five years.
Sequestration: Depending on the circumstances of the insolvent estate, it may occur within as little as six months from the date of sequestration.
In this instance, the sequestration process is superior to debt review once again.
Payments to creditors:
Debt Review: The debt counsellor will negotiate monthly repayment; however, creditors reserve the right to request a higher installment, resulting in an increase in the consolidated debt repayment. The creditor may choose to disengage from the debt review process and initiate legal action to collect the outstanding debt if the debtor fails to comply with these increases.
Sequestration: The creditors must establish their claims against the insolvent estate after the High Court grants the application and issues the sequestration order. If they opt to disregard the claiming process, they will write off the entire debt. If they successfully establish their claim against the insolvent estate, they will receive the available funds to partially satisfy the debt, subject to the validity of their claim. The difference will be written off.
In summary, it was evident that the decision between sequestration and debt review is contingent upon the unique circumstances of everyone. In certain cases, debt review was the obvious solution; however, in others, sequestration emerged as the victor.
I would recommend that any individual or couple experiencing financial difficulties seek the assistance of a debt solutions expert who can provide an in-depth understanding of the advantages and disadvantages of both processes. This is the only way to make an informed decision that benefits you and helps you reach debt-freedom efficiently and affordably.
