Sequestration simplified: Learn about the sequestration process in South Africa and the steps to take for a successful sequestration.
Understanding the Basics of Sequestration in South Africa in layman terms
We have answered the question "What is sequestration?" and related questions below to help you understand the full scope of sequestration and when it applies in South Africa. We simplified our answers to questions about sequestration.
What is the definition of sequestration in South Africa?
The brief response to the question, "What is sequestration in South Africa?" is that it implies a natural person's bankruptcy, however, it can also apply to a trust, The process comprises surrendering the natural person's estate and applying to the court to be declared insolvent. Simply put, it means you are declaring bankruptcy, and your debts will be erased.
What’s next after the sequestration order has been granted in court?
Once the court has approved the application, a trustee is appointed to oversee the distribution of proceeds from the sale of assets in the natural person's estate. The creditors receive the benefits, and the individual remains sequestered until a court application is made and approved for the rehabilitation of the person's estate, thereby restoring their financial standing.
In simpler terms, the answer is:
Simply put, after the court approves the application, you will be officially declared bankrupt. An assigned trustee will manage the administration of the bankrupt estate. The individual will remain insolvent until a rehabilitation application can be filed following sequestration in accordance with the insolvency act.
What happens to our debts during sequestration?
During the sequestration process, the applicant's debt is written off. The insolvent party's assets are sold, and the debt is paid. Once the insolvent estate has been finalised, the insolvent can apply for rehabilitation, provided that certain criteria are met. This is best investigated with an insolvency practitioner.
Can creditors still pursue legal action after sequestration?
Another frequently asked question is whether creditors can still pursue legal action against the debtor before the sequestration process is completed.
Fortunately, the response is no. Once the applicant's application for sequestration is published in the Government Gazette and a local newspaper, creditors must file objections in court. They cannot harass the debtor, seize any assets, demand payment, or charge interest on the debt.
Do I keep paying the creditors’ during the sequestration process?
By law, the applicant cannot give preferential treatment to one creditor over another. As a result, once the application process starts, the debtor must stop making payments to all creditors. The time between deciding on sequestration and a legal representative appearing in court on behalf of the applicant is usually around seven weeks. With respect to this time frame, the applicant is safe from further action by any of the creditors. That is, if the debtor didn't wait for too long, before making the final decision to continue with the sequestration process in South Africa.
Can the High Court in South Africa decline my application for sequestration?
Another common question is whether the court can refuse a sequestration application because the applicant lacks sufficient assets. The answer is yes, because the Insolvency Act requires that sequestration be awarded only if it benefits the creditors. However, creditors must receive a minimum of 20 cents for each rand. If the applicant has no immovable property, he or she must have adequate alternative resources that can be surrendered to provide a significant benefit to creditors. For instance, this can be a cash amount gifted, by a family member or a friend, to cover the benefit of creditors.
What will happen to my loose assets during the sequestration process in South Africa?
Clients often wonder what happens to their loose assets during the sequestration process in South Africa. Although there may be exceptions, the trustee is required by law to attach the furnishings. It is probable for the insolvency practitioners to negotiate for the furniture to be eliminated from the insolvent estate or to have the items evaluated with the condition that the applicant can purchase the furniture from the estate at a discounted rate. Keep in mind that jewellery tends to be included in an insolvent estate.
How can consulting with an insolvency practitioner help individuals make decisions?
Individuals filing for sequestration should carefully assess their assets and financial situation before proceeding. Seeking advice from insolvency practitioners can assist you by managing the process and preserving important assets from being included in the insolvent estate.
Sequestration and my credit score…
Furthermore, recognising the impact of sequestration on one's credit score and future financial opportunities is essential.
Contact a Debt Relief specialist like CureDebt, because we can help you evaluate the different options before making the final decision…
Before deciding, it is vital that you consider all available options and weigh all possible outcomes.
