Financial Rehabilitation following Sequestration Process in South Africa
In South Africa, financial rehabilitation following sequestration is a legal procedure where the insolvents' status is changed from "bankrupt" or "insolvent" to Rehabilitated.
Automatic Rehabilitation
According to the
South African Insolvency Act, Automatic rehabilitation is ten years after date of insolvency, if the insolvent doesn't apply to the court before the ten-year period prescribed.
Insolvents' Credit Profile
The insolvents' credit bureau record must show that they have undergone Financial Rehabilitation. This status lasts for five years before being automatically deleted from the person's credit bureau record.
What are the implications of Financial Rehabilitation following Sequestration?
If they don't have a criminal history due to alcohol use, the person who has undergone rehabilitation is eligible to seek for a
liquor license and resume holding specific employment roles that were previously barred. In essence, the party can regain complete control of their financial affairs after undergoing financial rehabilitation.
Approximate timelines for Rehabilitation after Sequestration
Two to Four years must typically pass after sequestration before someone can petition for financial rehabilitation. Before the court will permit this, though, there are some conditions that must be met. It is also possible to file for financial rehabilitation, but again, there are standards that must be completed, some of which are mentioned below.
The Rehabilitation Process Explained
On behalf of the applicant, the bankruptcy attorneys submit an application for rehabilitation. The
High Court must receive the application. The Rehabilitation Application is served on the Master of the High Court and the Curator appointed in the Insolvent Estate. Which in turn need to furnish the Court with the relevant documentation pertaining to the Insolvent Estate and the finalisation thereof. The rehabilitation order will be granted, and the Insolvent's Status will change from Insolvent to Rehabilitated.
Benefit to Creditors
After the sequestration procedure is over, the bankrupt party is free to approach the Curator at any moment with a proposition to the creditors. The insolvent party proposes to pay all creditors, even those without established claims against the relinquished estate, a minimum of 50 cents in the rand. Additionally, the relinquished estate's administrative fees must be offered in the bid. The Master of the High Court furnishes a certificate about the plan when the applicant has given him / her the necessary security for paying the creditors. The certificate also includes a statement on the security for the intended payment.
Notification of Intention to Rehabilitate
The insolvent is required to notify the Master of the High Court of its intention to rehabilitate and to publish notice of it in the Government Gazette. The applicant's attorneys get the appropriate trustee's approval to rehabilitate the bankrupt estate.
Can the Curator deny authorisation for Rehabilitation following Sequestration?
If the insolvent applicant does not comply with the trustee or curator when the court imposed the sequestration, the trustee or curator may refuse to provide authorisation for rehabilitation. If the applicant behaves in a financially irresponsible manner while being sequestrated, such as by applying for credit or taking on additional debt without the curator's or trustee's consent, the curator or trustee may also refuse to grant authorization.
When can I apply for Rehabilitation following Insolvency?
Once four years have gone since the date of sequestration and 12 months have passed since certification of the first liquidation and distribution account, where creditors have established claims against the estate, the application may be made. If the Master of the High Court has confirmed the first liquidation account, 12 months have passed, and the Master of the High Court has suggested financial rehabilitation, early financial recovery may be feasible. It is only permitted, nevertheless, in cases where the insolvent petitioner can show that rehabilitation is best for the individual.
What will we do next?
For assistance with determining if you qualify for financial rehabilitation, contact our attorneys.
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