Has your estate been sequestrated because of your unpaid debts and you need information on how to rehabilitate? Or do you need information on what sequestration is all about and how an insolvent can rehabilitate? For these questions and other issues that relate to sequestration and insolvency, this article provides answers to them. Specifically, you will get to know what is sequestration, the processes involved, and how one can come out of it.
What is sequestration in South Africa? Sequestration South Africa takes place after an order has been issued by the Court which declares an individual bankrupt/ insolvent. Insolvent meaning? Based on the South African law, insolvency is denying a person certain rights based on Court orders because of his or her inability to pay debts incurred. This denial means the legal capacity of that individual has been diminished
Looking at sequestration meaning from another way, it takes place at the point when the debt that an individual has incurred becomes too big to settle or impossible to manage, and the liabilities have exceeded the assets that such a person has. The implication of this is that, when someone becomes expropriated, the Court will appoint a trustee who would be in control of the insolvent's estate.
Sequestration process in South Africa
To sequestrate a person's estate, there is the need to carry out a test for insolvency. In carrying out this test, the debtor's liabilities would be considered with respect to the value of his or her assets. After a fair estimation has been carried out and it becomes glaring that paying back the debts is impossible, then, the individual becomes insolvent.
However, it should be noted that even though an individual satisfies the test for insolvency, if there is no order from the Court expropriating the person, such an individual cannot be treated as insolvent for legal purposes. Before the order can be granted, there are two conditions under which sequestration can be executed - voluntary sequestration and compulsory expropriation. In voluntary sequestration, the debtor willingly applies to the Court while in compulsory sequestration, the creditors apply to the Court to confiscate a debtor's estate.
What happens when a person is sequestrated?
The moment an individual's estate becomes sequestrated, there would be limitations as touching what the insolvent can do and what he or she will not be able to, at least, as long as the expropriation is effective. For instance, there is a limit to the kinds of contracts that the bankrupt can still enter into. Specifically, the insolvent will not be able to enter into any contract that involves sales of property that is part of the insolvent estate as well as the sales of moveable assets. Any transactions that involve the bankrupt would be in the interest of the creditors.
However, the bankrupt can still enter into any agreement that involves employment opportunities or which has to do with business. In fact, the person can still earn an income and pursue any profession for this purpose, only that he or she cannot be a trader in terms of general dealership or manufacturing, nor can he or she have an interest in a business like that. The only privilege the person has is if the curator grants permission.
How do you rehabilitate after sequestration?
The moment an individual becomes insolvent, it is only by a rehabilitation order that it can be terminated. Rehabilitation order, in this context, has to do with ending the expropriation of the debtor's estate and granting such debt relief while relieving him or her of every disability as a result of the expropriation. The main benefit of rehabilitation is that it enables you to live your normal life after sequestration.
How long does sequestration last in South Africa? Usually, a person can remain under expropriation until ten years have elapsed. The only alternative is if the person applies to the Court for a rehabilitation order, which usually can only be possible after four years.
However, the rehabilitation before the stipulated period can only be acknowledged by the Court when the claims have been fully paid or where the creditor(s) has accepted an offer of composition. This has to be based on three quarters of the creditors in value and number and also, payment must have been made or security given.
Moreover, rehabilitation can be considered if there are no proven claims against the estate of the insolvent and on the condition that it is the first time that the insolvent would be expropriated. But if the individual had been convicted for certain offences before or expropriated in the past, these are part of the factors that the Court considers when determining how long before a rehabilitation would be considered .
How to apply for rehabilitation after sequestration
When applying for rehabilitation, it can only be done through the High Court whose jurisdiction covers where the insolvent resides. Also, before this application can be filed in the Court, the bankrupt is expected to give notice of his intention first through advertisement in the Government Gazette, and another notice to the Master of the High Court.
Once the matter is set down for a provisional rehabilitation, a provisional order would be granted on the same day and about one-month postponement would be given to the case. On the date that is given to the insolvent to return, the Court would make the order final if there is no objection to the application and the insolvent becomes rehabilitated from that moment. Once the rehabilitation order is given, it means the bankrupt does not have to pay any debts he or she had incurred until the date that the expropriation began.
Having looked into what sequestration is all about, it is essential to note that falling a victim is never a pleasant experience, but then, it is an option legally approved in the country to help insolvents settle their debts. If you are expropriated, you can apply for rehabilitation after four years or once you have settled every claim put up against you. Then, the process of applying can be done through an attorney.