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Sequestration
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SEQUESTRATION/LIQUIDATION

Sequestration/Liquidation is one of the most common and in many cases the best or sometimes the only method to relieve the burden of debt.

ADVANTAGES OF SEQUESTRATION/LIQUIDATION:

1. All your debts will be written off and your salary and other income will still be yours;

2. You will be able to stay in your house for approximately 6 months or longer without having to pay the bond;

3. You will not be required to pay any of your creditors after starting the sequestration process;

4. Only your creditors are notified of the process, not your employer.

5. Once you begin the sequestration process we will deal with your. creditors on your behalf so you do not have to communicate with them anymore.

6. You will not be required to attend Court on the date of your application.

7. Your salary cannot be attached or garnished and all existing garnishee orders must be cancelled.

8. After publication of your Notice of Surrender, all legal action is stayed and no attachment can take place.

9. After 4 years you may apply to the Court for a Rehabilitation Order subject that the insolvency state has been confirmed by the master, your credit status will be declared credit worthy.

WHAT IS VOLUNTARY SEQUESTRATION/LIQUIDATION?

Sequestration is a legal process whereby your assets are sold by a Trustee appointed by the Master of the High Court and the proceeds are used to pay your creditors. After sequestration your debts are deemed to have been written off. Your creditors are no longer allowed to demand payment from you as their rights now vest in the Trustee. You will now be able to live a normal financial life, debt free. It is advisable that you own property, either immovable or movable, so that it can be realised to show benefit to creditors, however this is not a requirement. You do not have to feel guilty about going this route as it was never your intention to incur debt and not pay your creditors. A simple matter of fact is that life happens and you do not have control over every aspect of your life. With the interest rates hike in 2007, thousands of people and businesses were unable to bear this brunt and they went under. There is a light at the end of the tunnel. Don’t wait until it's too late.

FREQUENTLY ASKED QUESTIONS:

Q: HOW LONG DOES THE PROCESS TAKE? The process normally takes two months from consultation to your application being heard in court.

Q: WHAT ARE THE REQUIREMENTS IN ORDER FOR THE COURT TO SEQUESTRATE YOU SUCCESFULLY?

1.That you have complied with all the statutory formalities;

2.That your estate is in fact insolvent;

3.That you own a realisable property of a sufficient value to defray all costs of sequestration which will be payable out of the free residue of your estate; and

4.That it will be to the advantage of your creditors.

Q: CAN CREDITORS TAKE YOUR ASSETS WHILE YOU ARE IN THE PROCESS OF SEQUESTRATION?

No, the Insolvency Act prescribes that your intention to sequestrate must be publicized by way of registered post to our creditors as well as by publication in the Government Gazette and a local newspaper. Once the publication has appeared in the Government Gazette and the local newspaper, no creditor is allowed to sell any of your assets, even if the execution process against you has gone so far that the Sheriff has attached your assets.

Q: CAN YOU BE SEQUESTRATED WHILST/ AFTER YOU HAVE BEEN PLACED UNDER DEBT REVIEW?

Yes, the only requirement is that the debt review order must be set aside before the High Court can make the sequestration order.

Q: SHOULD I KEEP ON PAYING MY CREDITORS AFTER I HAVE DECIDED TO SEQUESTRATE?

No! Should you keep on paying certain creditors, you will prefer them above the others and this is illegal in our law.

Q: WILL MY SEQUESTRATION EFFECT MY DECISION TO IMMIGRATE?

No, insolvency is not a criminal matter in South Africa, but rather a civil matter. Therefore you will qualify for a visa and your immigration will be legal.

Q: WHICH PROPERTIES ARE EXEMPT FROM BEING INCLUDED IN THE PROCESS?

This is governed by Section 82(6) of the Insolvency Act 24 of 1936. The specific properties that are exempt are:

1.Your clothes;

2.Bedding;

3.The whole or part of your household furniture, excluding luxury items;

4.Tools of your trade;

5.Other essential means of subsistence;

6.Property held in trust by the insolvent in his capacity as Trustee (protected by S12 of the Trust Property Control Act 57 of 1988);

7.Life-insurance policies;

8.Pension benefits;

9.Compensation for loss or damage suffered because of defamation or personal injury;

10.Your salary or wages earned after sequestration, in so far as such money is needed for the support of the insolvent and his dependants.

Q: WHAT HAPPENS TO THE FURNITURE THAT IS NOT EXEMPT IN THE PROCESS?

We are able in most instances to negotiate with your Trustees to exclude your furniture from the insolvent estate. The worst case scenario is that your furniture is appraised, and you have to buy back the furniture from your insolvent estate, while the furniture stays in your possession. You will be able to buy it back at a very low price as the furniture is valuated at a forced sale value.

Q: WILL YOU BE ABLE TO RENT A HOUSE AFTER SEQUESTRATION?

Yes, you will definitely be able to rent after you have been sequestrated.

Q: HOW LONG WILL YOU BE ABLE TO KEEP YOUR CAR?

Where the vehicle has been bought on HP, the creditors are not allowed to execute any legal proceedings against you once the adverts have been placed in the Government Gazette and the local newspapers. Once the sequestration order has been granted and your Trustee appointed, the creditors will usually want the vehicle back. An arrangement will be made by your Trustee and yourself to hand the vehicle over.

Q: CAN YOUR EMPLOYER FIRE YOU BECAUSE YOU HAVE BEEN DECLARED INSOLVENT?

There are certain positions which you are excluded from holding once you have been declared insolvent. You are for example unable to be a Director of a company, the Managing Member of a Close Corporation or an Actuary. With regards to your employment, you can only be dismissed if there is a condition in your Letter of Appointment in terms of which you are not allowed to be an insolvent whilst in the employ of your employer.

Q: WHAT ARE THE EFFECTS OF SEQUESTRATION IF YOU ARE AN EMPLOYER?

This is governed by Section 38 of the Insolvency Act. Sequestration suspends the contracts of service between you and your employees. There are two options that are available to you. You can either transfer the contracts to a new owner of your business or the contracts can be finally terminated.

Q: ARE YOU ALLOWED TO ENTER INTO A CONTRACT AFTER SEQUESTRATION?

You are allowed to enter into any contract which does not pertain to the assets that fall into your insolvent estate. You are for example allowed to enter into a cell phone contract, rental agreement, anti-nuptial contract etc. You are even allowed to enter into a credit agreement if you have disclosed that you are insolvent and the creditor is willing to grant you credit. The discretion lies with the creditor.

Q: MUST YOU PAY THE MUNICIPAL LEVIES WHILST YOU ARE IN THE PROCESS OF SEQUESTRATING?

No, you have to stop payment as you are not allowed to prefer one creditor over another.

Q: MUST YOU KEEP ON PAYING THE WATER & LIGHTS WHILST YOU ARE IN THE PROCESS OF SEQUESTRATING?

Yes, you will need to keep on paying the water & lights so that they do not cut your power and water supply.

Q: WHAT IF YOU ARE A PARTY TO A LEASE AGREEMENT?

Should you have leased property at the time of your sequestration, the lease agreement is not automatically cancelled by your sequestration. You will simply carry on paying your rent and you stay on the property.

Q: WHAT ABOUT SARS? SARS is a preferent creditor in your insolvent estate. After you have been sequestrated SARS will issue you with a new tax number. With this tax number you will start on a clean slate with SARS. All credits and debits that was due to and from SARS before the date of sequestration vests in your insolvent estate.

Q: ARE YOU LIABLE FOR THE DEBTS OF YOUR COMPANY/CLOSE CORPORATION/BUSINESS TRUST?

There is a misconception that the mere fact that you are a Director of a company, member of a Close Corporation or Trustee of a trust makes you liable for the debt of that entity. You will only be liable for the debt if you have signed surety for it.

Q: WHAT IS REHABILITATION?

The rehabilitation process involves bringing an application to the High Court asking the court to relieve the insolvent of every disability resulting from sequestration. It ends the sequestration and discharges all the insolvent’s pre-sequestration debts. The insolvent will automatically be rehabilitated after the expiration of 10 years, but can apply at court to be rehabilitated after on 3 years.

Q: WHAT IS THE ROLE OF THE TRUSTEE IN YOUR LIFE AFTER SEQUESTRATION?

The Trustee will not be involved in your life. His only job is to realise the assets which fall into your insolvent estate, whereafter a dividend is distributed amongst creditors.

Q. WHAT HAPPENS IF I DONT OWN A HOUSE?

The only difference would be that the client would re responsible for the payment of the Total value of his debt incurred to the value of 20c to the R. Their is also a possibility that we might be in a position to arrange that the amount could be interest free and even payable over a 18 month period.