Understanding Financial Rehabilitation
Financial rehabilitation is required after an individual has become insolvent and his estate has been sequestrated. It may be automatic, after a specified time, or as the result of a court order, by which the insolvent status is removed.
The insolvent is considered unable to take proper care of certain financial matters. It also prevents the person from selling off assets which could be liquidated to pay creditors. Financial rehabilitation removes the limitations on the insolvent’s freedom to transact and allows them to begin a new financial life. The Insolvency Act 24 of 1936 provides for a sequestrated person to be rehabilitated in certain circumstances so that they may continue their lives free of insolvent status.
What Comes Before Financial Rehabilitation?
Financial rehabilitation becomes necessary for individuals in South Africa when they find themselves in one of the following situations.
If a person is over-indebted to such a degree that they enter the debt review process. Debt review is a formal debt solution in South Africa governed by the National Credit Act (NCA). It allows over-indebted consumers to restructure their debts and make reduced, affordable monthly payments under the supervision of a debt counsellor Once they complete the debt review process and settle their debts, they can be financially rehabilitated.
Financial rehabilitation happens after an insolvent has been sequestrated. It applies to insolvent individuals, partnerships and trusts and is regulated by the provisions of the Insolvency Act 24 of 1936. Sequestration is a legal process where a debtor’s assets are placed under the control of a trustee who sells them to pay off creditors. Sequestration occurs when a person cannot pay their debt as it becomes due, and their liabilities exceed their assets. After sequestration, an individual can be rehabilitated and their financial status restored, usually after several years and subject to certain criteria being met. An insolvent may voluntarily surrender their estate and be sequestrated. This option is suitable for individuals who have no means to pay off their debts and want a fresh financial start.
It also occurs after an insolvent has been subject to an administration order. An administration order is a court order granted by a magistrate’s court that allows a debtor to make reduced monthly payments to their creditors. The court appoints an administrator to manage the debtor’s finances and distribute payments among creditors. This option is available for individuals with total debt below a certain threshold.
It’s important to note that the process of dealing with personal insolvency in South Africa can be complex and may have long-term consequences for a person’s credit history. It is recommended that individuals facing financial difficulties seek legal advice and guidance from qualified professionals such as attorneys who specialise in debt-related matters and are qualified to explore the most suitable option for their clients’ specific situations.
Don’t Make Expensive Errors
Financial rehabilitation is an important legal process allowing a person to be relieved of the limitations of being insolvent. Once financially rehabilitated the former insolvent is re-instated as a credit-worthy member of society. Financial rehabilitation allows insolvents to re-take an active, independent, role in the economy by clearing their credit record.
There are formal requirements and time-sensitive stipulations for applications to the High Court for financial rehabilitation. Restoring your creditworthiness is extremely important for your ability to purchase high-priced items such as property and motor vehicles. Most consumers do not have the means to pay cash for these assets and need credit to afford them.
Make an appointment with Francois Uys Inc. Attorneys and let us help you to become debt-free. We will guide you through the formalities and represent you in all the critical consultations. We have over three decades of experience with sequestrations and an extensive list of satisfied clients.
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.
