Voluntary sequestration is a legal procedure in South Africa that permits people who are overwhelmed by financial obligation to begin over economically. While it might appear like an extreme action, it can offer welcome remedy for the concern of financial institutions, garnishee orders, and dangers of legal action. In this guide, we take a closer take a look at what voluntary sequestration is, how it varies from voluntary insolvency and voluntary liquidation, and the detailed procedure to follow.
Understanding Voluntary Sequestration
Voluntary sequestration includes a debtor willingly using to the High Court to be stated insolvent. This is normally done when a person’s liabilities surpass their possessions and there is no sensible possibility of settling financial obligations through regular payment. The debtor’s estate is given up to the court, and a court-appointed trustee takes control of the administration and sale of the possessions in order to pay financial institutions.
Unlike voluntary liquidation, which uses to business, voluntary sequestration is developed for personal people and sole owners.
Voluntary Insolvency vs Voluntary Sequestration
The terms voluntary insolvency and voluntary sequestration are typically utilized interchangeably, however there are small distinctions. Voluntary insolvency is a more comprehensive term that consists of any official procedure where a debtor acknowledges insolvency and looks for legal relief — whether through sequestration (for people) or liquidation (for business).
Voluntary sequestration, on the other hand, is a particular kind of voluntary insolvency that uses to natural individuals or people.
Step-by-Step Process of Voluntary Sequestration
1. Assess Your Financial Situation
Before beginning the procedure, you need to acquire a complete summary of your financial resources. This consists of noting all your financial obligations, possessions, regular monthly earnings, and expenditures. If your financial obligations considerably surpass your possessions, voluntary sequestration might be a practical choice.
2. Consult with an Insolvency Practitioner or Attorney
Voluntary sequestration is a legal procedure, and you will require the help of a certified insolvency lawyer or specialist. They will assist you identify if you satisfy the requirements and guide you through the legal procedures. This assessment will likewise consist of an expediency evaluation and an initial quote of just how much your possessions are most likely to recuperate for financial institutions.
3. Prepare a Statement of Affairs
With the aid of your legal agent, you will prepare a declaration of affairs — a comprehensive file describing your monetary status. This is sent to the Master of the High Court and consists of a list of financial institutions, possessions, liabilities, and other supporting documents.
4. Place the Advertisement
South African law needs a notification of your objective to make an application for voluntary sequestration to be released in the Government Gazette and a regional paper. This notifies financial institutions of the pending application and provides a chance to object if they think it is unjustified.
5. File the Application with the High Court
After the notification duration, your lawyer will submit the official application for voluntary sequestration with the High Court. A hearing date is set, and your legal group will provide proof revealing that your estate is undoubtedly insolvent which sequestration is the most proper service.
6. Attend the Court Hearing
Although your lawyer normally appears in your place, you might be needed to go to the court hearing. If the court is pleased that the application satisfies all legal requirements which sequestration will benefit your financial institutions, it will approve the sequestration order.
7. Trustee Appointment and Asset Administration
Once the order is approved, a trustee is designated to take control of your estate. The trustee is accountable for offering your possessions and dispersing the earnings amongst your financial institutions according to legal top priorities.
8. Debt is Written Off and Rehabilitation Follows
Once the procedure is total and financial institutions have actually been paid as far as possible, the staying financial obligation is normally crossed out. You can then make an application for rehab — a different legal procedure that clears your name and restores your monetary status, normally after 4 years (or faster, under particular conditions).
Voluntary Sequestration vs Voluntary Liquidation
While voluntary sequestration is concentrated on people, voluntary liquidation uses to organizations. If a business cannot pay its financial obligations and picks to end up operations, it can make an application for voluntary liquidation. The business’s possessions are offered and utilized to pay financial institutions, just like in sequestration. However, the crucial distinction is that the entity being liquified is a legal company, not a personal individual.
Voluntary sequestration is an effective tool for South Africans dealing with extreme financial obligation difficulties. It supplies a legal path to monetary liberty and comfort. While it needs quiting your possessions briefly, the long-lasting advantages of beginning fresh can far surpass the short-term sacrifice.
If you’re feeling overwhelmed by financial obligation, talk to a specialist who can assist you check out all your choices — consisting of voluntary insolvency, voluntary sequestration, or voluntary liquidation — and select the course that finest fits your individual or company scenarios.