Discover ’10 Things You Need to Know About Sequestration While Under Debt Review’ to grasp the intricacies of financial debt solutions. The article offers essential insights for maneuvering through the complex sequestration process while undergoing Debt Review.
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Sequestration While Under Debt Review
Financial difficulties can lead individuals to seek various debt relief options. Two such options are debt review and sequestration. However, what happens when you’re considering sequestration while already under debt review? This article aims to shed light on this complex issue.
Debt Review vs Sequestration
Debt Review
Debt review is a debt solution that assists over-indebted consumers to regain control of their finances. It was written into South Africa’s National Credit Act (NCA) about 15 years ago to assist consumers buckling under the pressure of debt.
Sequestration
Sequestration is a legal process where creditors can apply to court to have you declared bankrupt. This can be either compulsory or voluntary, depending on whether you apply for voluntary surrender of your estate. Essentially, your financial estate is declared bankrupt and placed under the control of the Master of the Court until a trustee or curator is appointed. This individual oversees the sale of assets and distribution of proceeds among the creditors according to their status. This process allows you to become debt-free within a few months, but it involves the loss of assets. Up to 80% of the amounts owed is written off.
Once sequestrated, you remain officially bankrupt until you have been rehabilitated. If you do not apply for rehabilitation, you remain sequestrated for a period of ten years. However, you can apply for rehabilitation as soon as the time frame and other requirements are met. Generally, it takes about four years from the date of sequestration before you can apply for rehabilitation.
Sequestration is regulated by the rules and regulations outlined in the Insolvency Act 24 of 1936. For a debtor to be sequestrated, they must be declared insolvent by the High Court. Insolvency is legally defined as a state where the debtor’s liabilities, when fairly estimated, surpass their assets, which are also fairly valued. Essentially, the debtor must be bankrupt.
Applying for sequestration is effectively an application to be declared bankrupt and to obtain protection from certain creditors. Sequestration can be either voluntary or compulsory. Voluntary surrender occurs when the debtor initiates the process without coercion, whereas compulsory sequestration happens when a creditor petitions the court to declare the debtor insolvent and to detach the debtor’s estate from them to secure the creditor’s claim.
Sequestration While Under Debt Review: Is It Possible?
The short answer is yes, but it’s a complex process that requires careful consideration. When you’re under debt review, it means you’re committed to repaying your debts in a structured manner over time. However, if your financial situation worsens and you’re unable to keep up with the agreed-upon payments, sequestration may become an option.
The Process of Applying for Sequestration while under Debt Review
To apply for sequestration while under debt review, you must first approach the court to rescind the debt review order. This is necessary because you cannot be under debt review and sequestrated at the same time. The court will consider your application and decide whether it’s in your best interest to rescind the debt review order.
If the court agrees to rescind the debt review order, you can then apply for sequestration. This involves submitting a statement of your financial affairs and a list of your creditors to the court. If the court approves your application, a trustee will be appointed to oversee the sale of your assets and the distribution of the proceeds to your creditors.
The sequestration process is intended to benefit creditors by ensuring they receive a significant portion of the credit extended. The courts have established that the liquidation of an insolvent’s assets should cover at least 20 percent of the outstanding debt, allowing creditors to recover a minimum of 20 cents for every Rand owed. This return is referred to as the dividend from the liquidation of the estate’s assets. The dividend may be distributed through the sale of any movable or immovable assets or through a one-time cash payment or installments over several months.
A sequestration order is issued to dissociate a debtor from their assets. It can be said that the court takes control of the debtor’s property or estate. These assets are then entrusted to the Master of the High Court, who appoints a trustee. The trustee is responsible for managing the debtor’s estate, ensuring that the assets are liquidated to generate funds to settle the debts with creditors.
What to consider before you apply for Sequestration while you are still under debt review
Sequestration is a serious step with long-term consequences. It will affect your credit record for many years and may result in the loss of your assets. Therefore, it’s crucial to consider all your options and seek professional advice before deciding to apply for sequestration while under debt review.
In conclusion, while sequestration during debt review is possible, it’s a complex process that should only be considered as a last resort. It’s always advisable to consult with a financial advisor or debt counsellor to understand the implications fully and make an informed decision. Remember, the goal is to regain financial stability and work towards a debt-free future.
Here are the five key takeaways from the article.
- Debt review involves a debt counsellor assessing your financial situation and negotiating with your creditors to reduce your monthly payments. Sequestration is a legal process where you’re declared bankrupt, and your assets are sold to repay your creditors.
- It’s possible to apply for sequestration while under debt review, but it’s a complex process that requires careful consideration and professional advice.
- To apply for sequestration while under debt review, you must first approach the court to rescind the debt review order. If the court agrees, you can then apply for sequestration.
- Sequestration has long-term consequences on your credit record and may result in the loss of your assets. Therefore, it’s crucial to consider all your options and seek professional advice before deciding to apply for sequestration while under debt review.
- Both debt review and sequestration offer a path to becoming debt-free and provide protection against further legal action from creditors. However, they also both indicate your diminished financial capacity on your credit record and require you to declare your financial status when asked about it on a form by an employer, credit provider, estate agent, etc.
Frequently Asked Questions
What does being sequestration mean?
Sequestration is a legal process in which an individual’s assets are placed under the control of a court-appointed trustee. The trustee takes control of the individual’s assets, sells them, and uses the proceeds to pay off the individual’s creditors. It’s typically used as a last resort for individuals who are unable to pay off their debts and is intended to provide a fresh start for individuals who are overwhelmed by debt.
What is the other meaning of sequestration?
Apart from the financial context, sequestration can also refer to:
- The act of taking temporary possession of someone’s property until they have paid money that is owed or obeyed a court order.
- The act of keeping people, especially a jury, together in a place so that they cannot be influenced by other people, by newspaper reports, etc.
- In environmental science, it refers to the act of separating and storing a harmful substance such as carbon dioxide in a way that keeps it safe.
Who qualifies for sequestration in South Africa?
Any individual who is unable to pay their debts and whose liabilities exceed their assets can apply for sequestration. The estate of natural persons, partnerships, and trusts can be sequestrated in South Africa.
What is debt sequestration?
Debt sequestration is a legal process where a consumer’s assets are placed under the control of a court-appointed trustee. This trustee will then sell all the assets to collect funds to repay the consumer’s creditors. This process is usually the last course of action that will be taken when a consumer cannot repay their debts.
Do I qualify for sequestration?
If you cannot pay your debts but possess enough assets that can be liquidated, leaving a sufficient remainder after settling secured creditors and covering the costs of liquidating your estate, then you may likely qualify for sequestration.
Can I sequestration without assets?
Indeed, sequestration is possible even without assets, provided that legal fees, estate administration costs, and minimum benefits requirements are satisfied or if the application necessitates a formal legal application. Nonetheless, the High Court might reject the application if it deems that it does not serve the interests of the creditors.
