Voluntary sequestration is the voluntary surrendering of your estate (financial affairs) to the Master of the High Court under the governance of the Insolvency Act 24 of 1936
It is an application brought in the High Court of South African, by an attorney in cooperation with an advocate on behalf of the debtor which ultimately allows the debtor (the applicant) to have up to 80% of his debt written off, as a final resort to escape insurmountable debt accrued through circumstance beyond his/her control.
Sequestration is thus the process by which a debtor who has become insolvent (someone who’s financial liabilities exceeds that of his/her income) can obtain the legal status of Insolvent in order to enjoy the benefits of the status
The debtor is relieved from further obligation to pay his/her creditors as stipulated by the original creditor’s agreement, and the creditor’s agreement and claims are brought to a close once they have received their benefit from the insolvent estate.
Assessment of the client’s unique situation:
First and foremost, the Insolvency Practitioner must determine if the client is indeed insolvent or if another debt remedy, as provided under the National Credit Act should be investigated further, as a possible solution to the debtor’s financial distress situation.
This is done by completing an application form which provides the Insolvency Practitioner with all the information is necessary to efficiently advise clients accurately.
Decision to apply is reached, what is the next step:
Once the client decides to proceed with the application the attorney will proceed by publishing the applicant’s intention in the Government Gazette, as well as obtaining a suitable court date.
The day the advertisement appears in the media the debtor falls under the protection of the Insolvency Act 24 of 1936 which means that he/she is prohibited from making any further payments to creditors (with the exception of garnishee orders – see FAQ)
The attorney will draft a statement of debtor’s affairs, as well as all the other Court documents in support of the High Court Application. In these documents he, will state amongst other facts, the following:
* List of creditors as well as each creditors’ outstanding amount.
* The benefit to the creditors should the application be granted.
(The norm is that this variates between 20c and 25c in the Rand)
The day of the court case:
As sequestration is a High Court application an Advocate will present your case to the Court on your behalf. There is no need for you appear in court yourself.
Once your case has been heard the attorney will contact you to inform you of the results whether the application was granted or not.
After the application has been granted:
The attorney will provide you with a court order as soon as the Court typist processed the court Order.
The Master of the High court will appoint a curator who will handle the financial affairs of your Insolvent Estate.
The client will have to provide to the curator (usually through the attorney) the funds needed to pay the benefit to the creditors. The client may request the attorney to negotiate on his behalf with the curator to pay off the amount due, over a period of 18 to 24 months or provide a full settlement of the amount in one cash payment. In the event where neither of these options as available or accepted by the curator, an auctioneer will be appointed to auction off the client’s assets to recover the amount due to the creditors.
The curator will (in accordance with the regulations of the Insolvency Act), distribute the benefit to creditors, as set out in the documentation of the sequestration application.
All Creditors’ claims have been settled by the curator:
The curator will provide the insolvent with a document stating that all aspects pertaining to the insolvent estate has been satisfactorily concluded.
This document will give the insolvent permission to apply for rehabilitation.
The entire process may take up to 34 months from date of Sequestration although in some instances it can be concluded in less than 24 months. All aspects depend on your unique personal circumstances.
You rid yourself of up to 80% of your debt, if you choose to pay the benefit to your creditors over a period of 18 – 24 Months no interest is applicable over this period. This in itself is a major benefit to the insolvent.
All legal procedures instituted by your creditors will be stayed with the publication of your intention in the media. Judgments already obtained by your creditors against you will also be included in the sequestration. Garnishee orders obtained by your creditors will cease to be operational as soon as you present your employer with the High Court Order.
The Creditors may not receive or demand payment from the Insolvent and must submit their claims to the Curator. The Curator will have a discretion to acknowledge or refuse a creditors claim. The insolvent is not involved in the administration of the Insolvent Estate.
Harassment by creditors is minimized (if not eliminated) as they are referred to the sequestration Attorney or the Curator.
Your future income is protected through preventing creditors form attaching your remuneration via the garnishee process.
The opportunity to pay off the benefit to your creditors, over a period, interest free in monthly instalments, will have a positive effect on your monthly cash flow not even to mention the effect of wellbeing it will have on your psyche. no need for you appear in court yourself.