EXPLAIN:  'ACT OF INSOLVENCY'

Are you familiar with the concept of an act of insolvency? We have a thorough understanding of the subject matter and its implications. However, it is important to consider that individuals who are not regularly exposed to legal terminology may not have the same level of familiarity and comprehension.

We have taken the initiative to provide the public with valuable information about this legal term and its implications, as we prioritise the well-being of our potential clients and the general public.

If you are experiencing financial difficulties, it is critical that you find out what exactly an Act of Insolvency means. Failure to understand what is considered an Act of insolvency can lead to you committing such an act without even realising it, giving a creditor the right to proceed with legal action against you.

What is an 'ACT OF INSOLVENCY'? 
It's the actions taken by a debtor that provide the creditor with sufficient grounds to file a compulsory sequestration application against the debtor. 

If a creditor wishes to apply to court for a debtor's compulsory sequestration, the creditor must be able to demonstrate that the debtor committed an act of insolvency. As a result, there is a legal presumption that if a debtor takes a specific action, it is proof that the debtor is indeed insolvent.

Examples of an 'ACT OF INSOLVENCY':
If you do not want a creditor to apply for compulsory sequestration because you committed an act of insolvency, avoid the following eight actions:

1.  Settlement Offer
It is a letter in which you admit that you owe a certain amount to the creditor. You request that a portion of the debt be written off and make an offer to settle the debt.

2. A written notice indicating your "INABILITY TO PAY YOUR DEBT."

Documenting your inability to pay the debt is considered an act of insolvency. This indicates an acknowledgement of your over-indebtedness, which is considered an act of insolvency because of the written communication. 

Additionally, once you sign an 'acknowledgment of debt, it proves your inability to service the debt. Therefore, it is not advisable to send any correspondence to your creditor with this message. Instead, consult our team for knowledgeable advice on how to deal with the matter.

3. Abandoning debt payments
If you disappear your home or country to avoid paying your debts, you have committed an Act of Insolvency. However, a creditor has a tough time proving intended action. However, nothing is impossible, so it is not a good idea to make an attempt. 

4. Satisfying a judgement held against you
If a creditor obtains a judgement against you and obtains a warrant of execution, but you do not have assets to attach, the creditor may apply for your compulsory sequestration.

5. Benefiting one creditor above the other
Paying one creditor but not the others constitute an 'act of insolvency'.  The remaining creditors can then apply for your sequestration under South Africa's Insolvency Acts, rules, and regulations. Because one creditor was preferred above the rest. 

Bear in mind that the insolvency laws in South Africa are written to ensure that one credit is not favoured over the other.  For instance, if you choose to pay your home and vehicle loans diligently but choose to abandon the other debt. 

The other creditors can bring a sequestration application based on the 'act of insolvency' that took place once you decided to favour the home and vehicle loan above the other creditors.

6. Not proceeding with sequestration after publishing the notice of surrender of estate.
Once you have published your intention for voluntary sequestration, you must proceed with the application, as the rules and regulations of the Insolvency Act allow a creditor to apply for compulsory sequestration. 

When you decided not to proceed with the voluntary insolvency after publishing the notice in the government gazette, you committed an 'Act of Insolvency'.

7. Failed to fulfil payment obligations after advertising the sale of your business.
If you promote the sale of your business without fulfilling your financial obligations to your creditors, they may assume that you are incapable of doing so. 

One option is to apply for the liquidation of the business. If it is a sole proprietorship, another option is to apply for personal sequestration.

8. Hiding your Assets
When you conceal or sell your assets to avoid attachment, you disadvantage creditors. It is a Declaration of Insolvency.

CURE DEBT Your DEBT SPECIALIST.