Voluntary Sequestration for a Debt-free Life
Consumer debt is a vital part of our economy and is therefore not a problem per se, but it becomes problematic when debtors are unable to pay when their debts are due. The inability to manage debt repayments is a worldwide phenomenon because many debtors struggle with debt management. Being unable to pay one’s creditors is known as being insolvent. The term ‘bankrupt’ is often used when referring to someone who cannot repay their debts. Potentially, the wisest course of action for South African consumers who become insolvent is to brief an attorney to apply for voluntary sequestration.
In South Africa, only the High Court can declare one insolvent. An attorney will bring an application to the High Court for you to be declared insolvent. You can voluntarily surrender your estate if you can demonstrate that your estate is in fact insolvent, it has sufficient realisable property to meet all the costs of sequestration and that granting the sequestration order will be advantageous to your creditors. Once an individual or a trust is declared insolvent, its assets are sequestrated.
What is the Difference Between Voluntary Sequestration and Involuntary Sequestration?
The Insolvency Act provides for two types of sequestration, voluntary sequestration and involuntary sequestration.
If an individual or trust is unable to service their debt, an application can be made for sequestration of their estate in terms of the current South African Insolvency Law. Voluntary sequestration takes place when an individual’s or trust’s estate is voluntarily surrendered to the Master of the High Court. The Master of the High Court then appoints a Curator or Trustee to assume control of the surrendered estate.
Involuntary sequestration occurs when the application to sequestrate is instituted by a creditor of the insolvent.
The Voluntary Sequestration Process in Short
In the case of voluntary sequestration, an advertisement, known as a Notice of Surrender, is placed in the Government Gazette and a local newspaper that circulates in the district in which the applicant resides. Publication of the Notice of Surrender prevents the institution of any further legal proceedings against the sequestrated party.
A Statement of Debtor’s Affairs is prepared and lodged with the Master of the High Court under inspection for a minimum of 14 days.
Registered letters are then sent to the insolvent’s creditors giving them notice of surrendering the estate. Creditors are then entitled to ask the attorney on record for any information pertinent to their interest in the estate.
The South African Revenue Service (SARS) must also be notified of the individual’s change of status. Registered taxpayers are required to apply for a new tax number which will apply to the new estate that is being established.
What is the Benefit of Sequestration?
Sequestration is not the only option open to insolvent individuals. Debt counselling, for instance, may be able to clarify your financial position but you will remain liable for repaying the debt.
The primary benefit of sequestration is that all unsecured debt will essentially be cleared, and the insolvent will no longer be liable for it. Once you are declared insolvent, and your estate is sequestrated, creditors may no longer institute proceedings against you or deal directly with you.
Turn to the Debt Specialists
If your debt has become an insurmountable burden and your creditors are hounding you for money at every turn, call Francois Uys Inc Attorneys. With over 33 years of working with insolvency and sequestration, we will guide you to a debt-free outcome. There are strict formal requirements and many decisions that must be made that can significantly alter the result to your benefit or your detriment.
Make an appointment with Francois Uys Inc Attorneys and let us assist you with your debt. We will guide you through the formalities and represent you in critical consultations with the Curator of your estate. We are proud to showcase a long list of satisfied clients and would like to add you to the list.
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.
