In certain cases, Voluntary Sequestration might be the best and sometimes only option left to sort out your debt. The effect of a voluntary sequestration is like pressing a “reset” button on your debt. You literally start over.
What Is Voluntary Sequestration?
Voluntary Sequestration is a statutory process where your estate (assets & liabilities) is surrendered to creditors to repay what you owe them, and you are then declared insolvent/bankrupt.
What are the benefits of Voluntary Sequestration?
- Your salary, pension and other income is protected, you do not have to pay any creditor.
- Only your creditors are notified of the process and not your employer or any other person.
- All legal action against you is stopped.
- Your creditors communicate with us, which means you won’t get nasty phone calls from your creditors.
- Your cashflow improves immediately because you won’t have to pay your creditors anymore.
- You will not have to attend Court
Disadvantages of Voluntary Sequestration
Assets like property and your vehicle might be vested in the insolvent estate, meaning that there is a chance of losing your house or car
You can’t be a director of a company
Your credit record will be affected and will reflect a listing that you have voluntarily sequestrated
You’ll not be able to apply for credit for up to 4 years
To get back on your feet after the Sequestration, a second application will have to be made to the court to ask for a Rehabilitation order.
How does Voluntary Sequestration work?
Our very smart attorneys will make an application for sequestration in the High Court. If the Court approves the application and is satisfied that there is sufficient equity in the estate, the Court appoints a Curator to handle all administrative aspects of the voluntary sequestration.
From that point onward, the Curator is responsible for the entire estate and must realise the debtor’s assets according to the solvency laws of South Africa. The Curator is also responsible for distributing the proceeds of the sale of the assets to the creditors.
For a voluntary sequestration to be successful, the Curator must be able to realise at least 20% of the total value owed to creditors from the assets in the estate. Where a property or vehicle is included, 100% of the outstanding balance must be realised.
If your voluntary sequestration is successful, there will be no further obligation to make any payments to your creditors. This will drastically improve your cashflow.
Unfortunately, you’ll be prohibited from entering into new credit agreements for 4 years. After 4 years have lapsed, an application for rehabilitation will be made which will declare that you are no longer insolvent/bankrupt, and that you can enter into new credit agreements.
In certain cases, a rehabilitation application can be brought before 4 years have passed. This is however in exceptional circumstances and not the general rule. In certain cases you might also be able to keep your house and your car.
