What does the term voluntary insolvency mean?
When you search the internet for the meaning of voluntary insolvency, you will get an array of responses. But they will all share the same basic explanation.
Voluntary insolvency means that, if you’re over-indebted, you can approach the High Court of South Africa to declare yourself bankrupt.
This will mean that the bulk of your debt will be written off and the remainder will either be paid back interest-free or, if you have sufficient assets to cover the remainder of the debt, the assets will be sold, and the proceeds will be used to pay the remainder of the debt.
When is a good time to consider voluntary sequestration now that you know what it means?
If you have an excessive amount of debt and are having difficulty making ends meet, you should consider voluntary sequestration, also known as insolvency, bankruptcy, and voluntary surrender of estate.
How does one qualify for voluntary sequestration?
If your liabilities exceed your assets, you’re a good candidate for voluntary surrender. Despite the concise definition of voluntary sequestration, it is a complex process that no individual or trust can undertake alone. We recommend collaborating with a sequestration expert to guarantee the success of this process.
What is the purpose of an insolvency expert, and why can’t I do it myself?
The process itself is a legal process, as you gathered from the concise description of voluntary surrender and what it means. Therefore, to ensure the success of the process, you need to adhere to the rules and regulations stipulated in the
Insolvency Act, Act 24 of 1936.Why is it so important to follow the rules and regulations stipulated in the Insolvency Act when applying for voluntary sequestration? If the meaning of voluntary sequestration is that my liabilities exceed my assets, then why can’t I just inform the court of this? I don’t have the funds to pay for a legal process.
The Insolvency Act provides guidelines for drafting and submitting the court application. You must follow specific timelines and notify the creditors of your intention to apply for voluntary sequestration before the court date. This is to ensure that if a creditor wishes to oppose the matter, the courts can take this opposition into consideration before making a decision.
Let’s have a quick look at some of the advantages and disadvantages of voluntary sequestration and what this can mean for you:
Ten (10) Advantages of Voluntary Sequestration:1.
Debts will be written off.
2.
No more harassment from creditors for payment of the debt.
3.
Sequestration stops all legal action.
4.
Garnishee orders will be removed from your salary.
5.
You will have more disposable income in your household.
6.
You stop paying the debts the moment you start the process.
7.
You’ll be able to clear your credit name within as little as six months from the date of sequestration, depending on whether you adhere to the requirements indicated in the
Insolvency Act, Act 24 of 1936.
8.
You will not lose your movable assets. You will have the option to either purchase it back from the insolvent estate or have the curator / trustee sell the movable assets to recover the amount due to settle the debt in terms of the proven claims against the insolvent estate.
9.
You will not lose any tools of your trade, meaning any assets that assist you in earning your income. For instance, a carpenter will not lose his tools, and a computer programmer will not lose his computer.
10.
Financial rehabilitation after sequestration is the shortest period when considering any alternative debt relief solutions and the most cost effective of all debt relief solutions.
Disadvantages of Voluntary Sequestration:
As with any legal process, there are advantages and disadvantages to consider prior to reaching your final decision.
1.
You cannot take on new debt or credit agreements during insolvency. After sequestration, you must apply for rehabilitation before taking on new debts or credit.
2.
You cannot serve as a director of a company. However, you can own a sole proprietorship.
3.
Additionally, you cannot serve as a trustee of a trust. But you can be a beneficiary of a trust.
4.
If you have immovable property registered in your name, it will become part of the insolvent estate, and you will lose it.
5.
If you inherit any assets, whether financial, movable, or immovable, the executor of the deceased estate must transfer the inheritance to a trust or safeguard it until the heir provides the executor of the deceased estate with a rehabilitation order after sequestration, unless the last will and testament explicitly state that no inheritance may form part of an insolvent estate. This will secure any inheritance if you’re insolvent.
6.
If you decide against applying for rehabilitation after sequestration, you will be insolvent for ten years, after which you will rehabilitate automatically without a court order. This is also known as statutory rehabilitation.
7.
Your credit profile will list your insolvent status.
Conclusion:
Now that you understand the essential meaning of voluntary insolvency and how it can affect you, we have arrived at the following conclusion:
It is evident that declaring bankruptcy is a significant decision when one understands the complexities of voluntary insolvency. In order to make an informed financial decision, it is imperative to evaluate all alternative debt relief solutions, as this is a last resort. We suggest that you consult with a debt solutions specialist to conduct a thorough debt assessment.
CureDebt, a debt relief expert, offers a comprehensive range of debt relief solutions under one roof. This is advantageous for you. Our esteemed debt solutions consultants will provide you with expert advice regarding your financial situation, and the evaluation and consultation are free.
This could help you reach an informed decision regarding your current financial situation. Your inquiry will not result in any punishment or listing at the credit bureaus, making it a secure process to identify the most appropriate debt relief solutions for your particular financial circumstance.
It's worth mentioning that the criteria for applying for voluntary sequestration vary, based on the circumstances in question. It's beneficial to speak with an
NCR-accredited debt solutions expert before proceeding with sequestration.
Our Debt Solution Experts will assess your specific circumstances and provide advice on whether sequestration is the best debt solution for you.
At Cure Debt, all assessments are FREE.In this article, we commit to providing you with a basic understanding of the meaning of voluntary insolvency and its effect on your financial well-being.
However, it is always better to contact one of our bankruptcy experts to assist you with a free assessment and consultation to ensure you understand the implications of such an application, including all its advantages and disadvantages.
It is important to remember that the voluntary sequestration process is a complex legal process, and if not dealt with in a professional and correct manner, it can be a very stressful and frustrating process. Therefore, we recommend consulting with a
qualified NCR-accredited debt solution expert before proceeding with any debt solution.
Important to remember:
The National Credit Regulator (NCR) monitors debt relief solution practitioners. Therefore, any practitioner specialising in debt relief solutions must be NCR-registered.
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