How Debt Review and Sequestration are Different
If an individual or trust is unable to pay their outstanding debt, one of the options open to them is to apply for the sequestration of their estate. In terms of South African Insolvency Law, this may be a voluntary or an involuntary process. The process is deemed voluntary sequestration where the debtor initiates the application by instructing their attorney to surrender their estate to the Master of the High Court. Once the High Court grants the application, a Curator or Trustee is appointed to take control of the surrendered estate.
The sequestration is involuntary when an application to sequestrate is instituted by one or more of the individual or trust’s creditors.
Although several debt advisors or agents are advertising their services to assist with sequestrations, only qualified Attorneys, who are registered with the Legal Practice Council, are authorised to handle these applications.
Debt Review as Opposed to Sequestration
Any individual who is struggling to make their debt repayments can approach the National Credit Regulator to find a registered debt counsellor. Debt review is a process designed to help debtors who are struggling to meet their debt obligations.
After the consultation, a debt counsellor approaches your creditors and makes payment arrangements on your behalf, to reduce your payments to a manageable monthly amount. Once you’re in debt review, you will:
- Get assistance from a debt counsellor, who will walk you through the process.
- Not be able to apply for credit.
- Be listed on the credit bureau.
- Be liable for paying debt counselling fees.
- Still need to pay your instalments while under review.
The Debt Review Process
- Approach a debt counsellor of your choice and complete an application form.
- The debt counsellor informs all your credit providers and the credit bureau that you have applied for debt review.
- You provide your debt counsellor with documentation setting out which accounts you have and how much is owed on each account.
- Your debt counsellor determines over-indebtedness using the Certificates of Balances received from each credit provider.
- Your debt counsellor will renegotiate with your credit providers to find a suitable payment arrangement.
- You pay according to the new restructured agreement which is finalised by the granting of a debt review Court order.
- The debt counsellor issues a clearance certificate once all debt obligations are settled.
How You Can Benefit from Sequestration
In instances where the level of indebtedness reaches the point of insolvency, debt review will not ensure that creditors are paid. In these cases, sequestration may provide the only means of restoring creditworthiness. This option results in several beneficial consequences.
The Master of the High Court is asked to intervene and appoint a Curator or Trustee to deal with your assets and liabilities. As soon as this happens, creditors may no longer institute proceedings against you to recover the outstanding debt, and you are shielded from further harassment by your creditors. All your debt is written off and the proceeds from winding up your estate are paid to creditors.
The process will result in insolvency which carries with it limitations on your legal capacity until rehabilitation has occurred. Until such time, you will not be able to become a Director of a Company or a Member of a Close Corporation. Your status as an insolvent will be listed with SARS and on the credit bureaus. You will also not qualify for credit.
These are Complex Legal Processes
The decision to sequestrate or to opt for debit review is nuanced and complex with strict formal requirements.
Francois Uys Inc. has over 33 years of experience with debt, sequestrations, and associated matters. Let us help you achieve the best possible outcome. We will guide you through the formalities and represent you in consultations with the Curator. Several important strategic decisions need to be taken to protect your interests. Book an appointment with Francois Uys Inc. Attorneys and we will guide you through the process.
Disclaimer: This article is for information purposes only. It does not constitute legal advice and cannot be used to make any decisions. For advice on the topic of sequestration contact Francois Uys Inc. The information is relevant as of the date of publishing.
