Sequestration in South Africa: How It Works and What You Need to Know
Sequestration is an option open to a natural person or a trust in South Africa in the event that they get into financial distress. This process is usually a consequence of insolvency. Sequestration is a legal process in terms of which the person’s estate is surrendered to the High Court and a Curator or Trustee is appointed to manage the distribution of benefits, from the sale of the estate assets to the creditors. When a person or trust is unable to pay their debts and their financial situation is irreparable, the financially distressed party may be sequestrated. The process ends when the person becomes rehabilitated and is released from their previous debts.
If an individual or trust is sequestrated, it formalises its status as insolvent. This occurs when the estate is surrendered to the Master of the High Court in terms of the provisions of the Insolvency Act 24 of 1936. An individual or trust may apply to be sequestrated, or a creditor may apply for their debtors to be sequestrated should they be unable to pay when their debt becomes due. The former is referred to as voluntary, while the latter is compulsory.
When Sequestration Can Benefit You
If you find yourself overwhelmed by debt and constantly being hounded by creditors, applying to be sequestrated may be an option worth considering.
One of the primary benefits of sequestration is immediate relief from all your creditors. Once sequestrated, all legal actions against you are halted. This pause provides relief from aggressive creditors and allows you the opportunity to reorganise your finances. Sorting out your financial state is easier without constant pressure from creditors.
Once sequestrated, your assets are placed under the control of a Curator or Trustee. This protects them from individual creditors and prevents them from being seized to settle only some of your debts. The Trustee or Curator manages the distribution of assets in as fair and equitable a manner as possible among all creditors. Being sequestrated will safeguard you against garnishee orders which are court orders that enable your creditors to deduct money directly from your salary.
Sequestration provides a structured approach to handling your debt. You are simply required to disclose all your assets and liabilities to the Trustee, who is experienced in developing plans for asset distribution and debt management. This can be immensely helpful for individuals who are struggling to manage their debts independently.
Being sequestrated allows you to get a fresh financial start. Your debts can be written off, with some specific, limited, exceptions. You can start rebuilding your estate without the burden of your previous debts and proceed with a clear credit record.
Potential Drawbacks and Consequences
Sequestration assigns you the status of being insolvent. In South Africa, it imposes certain limitations on your legal capacity until you are rehabilitated. For instance, you may be restricted from acting as a Director of a company and your status will be reported to credit bureaus making obtaining credit difficult. The South African Revenue Service (SARS) will also be notified of your status. These measures will have an impact on your creditworthiness. Some employers do not or may not employ insolvents while others may be hesitant to hire such individuals. However, with legal support and rehabilitation, you will be declared solvent in no time.
The Importance of Specialist Legal Advice
Seeking advice from Attorneys experienced in the resolution of debt-related matters is crucial. They possess practical knowledge of sequestration, can guide you through the complex legal formalities, help you make informed decisions, and achieve the best possible outcome for your specific circumstances.
Francois Uys Incorporated Attorneys have over 33 years of experience and are recognised experts in the law surrounding sequestration and insolvency.
Book an appointment with us today to receive legal advice that you can rely on.
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 Attorneys. The information is relevant as of the date of publishing.
