Why is this true? Find out if this is true for you too? Have you been under debt review, but the instalment is too high?
It’s not sustainable, and you cannot afford the monthly repayment, and you’re unable to get out of debt review before the debt is paid in full. This can take years, especially if your debt is more than R100 000.00.
In the South African financial landscape, Debt Review is often presented as the primary solution for over-indebtedness. However, for a significant number of consumers, the structured repayment plans of the
National Credit Act (NCA) prove insufficient.
When a debt repayment plan spans a decade or leaves a household with negative cash flow, the legal alternative is Voluntary Sequestration, a process designed not just to manage debt but to discharge it (get debt written off).
1. The Threshold of Insolvency
Debt Review is a survival strategy for those who are over-indebted but still have a surplus of income to settle debts over time. Sequestration, however, is the legal remedy for those who are insolvent.
Under the
Insolvency Act 24 of 1936, insolvency occurs when your liabilities exceed your assets. If you find that your Debt Review instalments are barely covering the interest on your accounts, you may be in a "debt trap" where the only escape is a formal declaration of bankruptcy in the High Court.
2. The Legal Mechanism | How Sequestration Works
Sequestration is a High Court application where a debtor surrenders their estate for the benefit of their creditors. This is often the superior "Plan B" because:
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Debt Write-Off: While Debt Review requires 100% repayment, sequestration can lead to the write-off of debts.
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Legal Concursus Creditorum: Once a sequestration order is granted, a concursus creditorum (concourse of creditors) is established. This replaces individual creditor actions with a collective execution procedure, effectively stopping all legal harassment and garnishee orders.
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Asset Management: While financed assets (like a house or car) are typically surrendered to a trustee, practitioners like CureDebt help clients navigate the negotiation of buy-back agreements for movable assets. Therefore, you will not lose your paid up movable assets when you opt for the sequestration process.
3. Proving "Advantage to Creditors"The most critical hurdle in a sequestration application is proving that the process will be to the advantage of the creditors.
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The Dividend: South African courts generally require proof that creditors will receive a minimum of 20 cents for every Rand (20%) owed. This is only true for Voluntary Insolvency application. When it comes to Compulsory Sequestration applications, the process differs.
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The Dividend Calculation: This dividend is usually realised through the sale of assets or a cash contribution.
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Specialists at CureDebt perform a detailed assessment to ensure this threshold is met before any fees are paid, as a result, the evaluation and consultation are free of charge.
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Case Study: Financial Breakdown (R200,000 Debt)
To illustrate the difference in capital requirements between a full repayment plan and a write-off of debt via voluntary sequestration, consider an individual with R200,000 in unsecured debt.
⚠️ WARNING: The following figures are for illustrative purposes only. Every financial profile is unique. The actual outcome, required dividend, and final costs will differ based on your total debt amount, the nature of your assets, and the specific requirements of the High Court.Item Estimated Amount Legal/Financial Context
Total Outstanding Debt: R200,000 Total unsecured credit (loans, cards, etc.)
Advantage to Creditors: (20%) R40,000 The "20c in the Rand" legal minimum requirement.
Debt Written Off: R160,000 (80%) The amount legally extinguished by the court.
In this scenario, instead of paying R200,000 (plus restructured interest) over several years in Debt Review, the debtor settles the "Advantage to Creditors" amount. Once this is finalised, the remaining R160,000 is legally written off.
It is important to remember that fees and disbursements are not mentioned in this scenario, and should you decide to contact us, we will provide you with an official quotation and a breakdown of the costs of the application.
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4. Rehabilitation: The Road to a Fresh Start
Sequestration is a temporary legal status. The end goal is Rehabilitation, which restores your full legal capacity and removes the "insolvent" notice from your credit record.
Stages: 
