F.A.Q - Sequestration

When a natural person is sequestrated, a trustee is appointed by the Master of the High Court to take control of their assets. On the other hand, when a company, close corporation, or certain other legal entities are liquidated, the person appointed by the Master is referred to as a liquidator.

A curator is someone appointed to be the guardian of the assets of an institution like an art gallery or museum. A curator is also the title used for a person appointed as a guardian of someone who does not have the mental capacity to look after their financial affairs. It is important to note that a curator is sometimes erroneously used when referring to a trustee or liquidator.

Creditors are not allowed to attach your salary. However, you will be required to file an income and expenditure report for about 6 months. The surplus on your monthly budget might vest in your insolvent estate if it is too large. Your pension or provident fund does not vest in your insolvent estate, and tools of the trade do not form part of the insolvent estate.

No, your pension or provident fund does not vest in your insolvent estate.

No, tools of the trade do not form part of the insolvent estate.

You will be able to keep your car until shortly after sequestration. Once an advertisement has been placed in the Government Gazette, all execution steps against you stop. Once you have been sequestrated and the trustee has been appointed, the creditors would normally want their assets back.

It is possible for a banking institution to approach the court before the sequestration order is granted and ask the Court for an order in terms whereof they take possession of the vehicle simply to keep it safe. However, this situation is rare.

Yes, you can transfer assets to a family trust, but it is best to do this over a longer period. Putting assets into a trust can be done by donating to the trust or purchasing the assets using credit, cash, or loans. However, it depends on who owns what and if legal actions were started against you or by you.

There are restrictions on the transfer of assets if the assets have been attached, are financed, or if there are insolvency litigation steps issued against you. If a creditor has a bond or other type of security over the asset, you will need the consent of the titleholder to transfer the asset.

Judgements as well as the sequestration will be listed on the credit bureaus until you are rehabilitated. Once you are rehabilitated, credit bureaus are obliged to; Remove adverse information of which the cause of action arose before your sequestration.

Banks & recovery agents
Usually gets referred to a call centre. You can Ignore/refer them to us when we start your Sequestration process. Will eventually get referred to an attorney for collection. The collections attorney might issue a claim against your insolvent estate

Suppliers
Few questions you will have to answer. Do you need the supplier or can you obtain materials at a different supplier for future purposes?

• vendor listings?
• career change?

 Landlords
The landlord has a landlords hypothec over property, inside the rental property for rental arrears. The landlord must first obtain a court order or perfect his hypothec which is very quick. He/She must then lock the premises or take control over the assets in the property.

• consider the remainder of the lease agreement
• negotiate lower rates/move premise

Personal creditors
It depends on the situation. Please consider if they have security in the form of a notarial bond or hypothec and attitude towards you and vice versa.
Family creditors
This is between you and the family member.

Sequestration offers several benefits, including the fact that all debt will be written off, and the Master of the High Court will appoint a curator to deal with all your creditors, and they cannot pester you anymore.

There can be no garnishee (attachment) orders on your income or salary, and judgments against you are removed by the sequestration order. Your credit record will be cleared once rehabilitated, and this High Court order overrules all other court orders, such as debt counseling, judgments, etc., and they are unenforceable.

A natural person may apply for sequestration if any of the undermentioned applies:

• Their liabilities (debt) exceeds their assets;
• Judgement has been obtained on their assets;
• The client has shortfalls on assets after repossession;
• The client cannot satisfy their monthly payments to their creditors and declares to their creditors that instalments can’t be met, this is an act of insolvency;

We provide you with a free financial assessment to determine if you are eligible for Sequestration.

If your vehicle is financed under a Hire purchase agreement, your vehicle vests in the insolvent estate and therefore you will lose it. However, if the vehicle is financed on a lease or Rental agreement then the creditor has an option to allow you to keep on paying the vehicle and keep possession of the vehicle. The Curator would consider whether there is any equity in the vehicle value as opposed to the settlement amount.

Should you lose your vehicle we can refer you to a RENT TO OWN company who will allow you to rent a vehicle, of your choice, through them. It would not matter whether you were sequestrated or not and credit worthiness is not a criterion. With the Rent to own you still become the owner of the vehicle once paid and is similar to a Instalment Sale Agreement.

Yes its perfectly legal. Many landlords will rent property to an insolvent. Remember that your disposable income will probably be more than pre sequestration. 

If you are married in community of property, then, yes, your joint estate will be affected by the sequestration. However, if you are married out of community of property (ANC) then your spouse has his/her own individual estate, and it will not form part of your sequestration. Your children’s estate(s) would under no circumstances be affected.

Parking tickets, speeding fines, television licenses etc. are all excluded from your sequestration and you must still pay it.

No. You will however be liable to pay the estate the second hand value which is much lower than the replacement value. 

In terms of the process, you will have roughly 8 months. This may however be negotiated with the appointed Trustee.

Yes. Preferably at a bank to which you don't owe money. 

No, you should not keep paying any of your creditors. Except if it's for essential services such as prepaid electricity. 

The banks make use of collection agents who generally uses intimidation tactics to collect vehicles. The only person that is legally entitled to collect your vehicle is the sheriff of the court and only with a court order.

You will not need to appear in court personally, we will appoint an advocate to appear on your behalf.

 A Secured Creditor is a creditor which old security for the credit. Examples: bond over your company’s property, motorcar/asset finance etc. He stands first in line in the asset is sold.

This principle does not apply to liquidations. It applies to sequestrations. You can look up the meaning under the tab “liquidation”.

A preferent creditor is a creditor who holds security for his loans for example the creditor who has granted you a loan on your house or a hire purchase on your motor vehicle are examples of secured creditors. Apart from these creditors certain statutory creditors are preferent for example the taxman, employees, television licenses, costs owing to your doctor on your deathbed etc.  

Concurrent creditors are those creditors who do not hold any security for the money you owe them. In practical and legal terms they stand at the very end of the cue when it comes to the hope or possibility of receiving anything from your Insolvent estate.

 In the winding-up of your company’s estate it might happen that, even though preferent creditors receive a dividend, there are not enough funds to cover the administrative costs of the insolvent estate. You must keep in mind that preferent creditors are only obliged to pay the cost of realization of the asset of which they hold security. They are not obliged to pay the “general administrative cost”. Should there be a shortfall in the “general administrative cost” then each creditor who has proven a claim in your insolvent estate becomes liable for the administrative cost, pro rata to the amount of this claim.

Please don’t tell the bank that you feel guilty. They will most probably have a service charge for that as well, do not feel guilty. If it was not your intention to incur debt intentionally and not pay your company’s creditors, you would be worthy of your guilt feelings. Feeling guilty could not change the situation.

You must be insolvent and the court must be satisfied that your sequestration will be to the advantage of your creditors and therefore in the best interest of your creditors. Traditionally a dividend of at least 10 cents in the Rand for concurrent creditors is seen as advantageous to creditors. Recent case law has however moved the threshold higher in that it has been ruled in 2010 that a dividend of at least 20 cents in the Rand is advantageous to creditors. This dividend can be paid either by the sale of any movable or immovable assets that you may have or it may be paid via a once off cash payment or a cash payment that is spread over a period of several months.
If you meet the qualifying criteria, then an application to surrender your estate will be made to either a Provincial or Local Division of the High Court.

Sequestration stems from the debtor being declared insolvent. An insolvent is restricted from obtaining credit, he or she is regarded as not fit to hold certain official positions, is barred from entering certain contracts, and cannot follow certain vocations.
Once a sequestration order is granted, all civil debt legal proceedings against the debtor must seize. This means that any judgments taken against the debtor for debt, become null and void, including those that enforce emolument attachment orders.
The claims of all creditors are treated as one, creating what is legally known as a concursus creditorium, or a ‘coming together of creditors’ and no creditor is allowed to pursue any claims against the debtor where it may negatively affect the claims of other creditors.
A creditor’s right to recover a debt in full, is restricted and replaced by the right to prove a claim against the insolvent’s estate, in order to share with all other creditors, the proceeds of realisation of the insolvent estate’s assets. In other words, creditors are only allowed to claim portions of the entire estate’s value and not the entire debt owed to them. The portion that each creditor is allowed to claim, is governed by a pecking order of creditors, which ensures that the distribution is equitable and fair to all creditors.

Debts are in effect reduced to what is referred to as the dividend, and the insolvent only pays what value his or her estate can realise.
Creditors have to prove their claims with the Master of the High Court, or the appointed trustee, which means that the insolvent may be able to reclaim some of his or her assets, where a claim is not proven.
Any on-going legal proceedings for debt must stop immediately and once the notice of surrender of your estate is published, any assets that have been attached under a writ of execution cannot be sold. This also means that any harassment for unpaid debt will stop, because the threat of legal action becomes toothless.
Emolument attachment orders, better known as garnishee orders against your salary must stop.
Certain assets may be returned to the insolvent’s possession, where these are essential to his or her ability to make a living. Thus, assets that are essential to the insolvent’s trade may be recovered.

If the consumer has disposed of or plans to dispose of any assets before he or she applies for sequestration, the following must be taken into account from the Insolvency Act.
Section 29 of the Insolvency Act 24 of 1936 provides as follows:
(1)   Every disposition of his property made by a debtor not more than 6 months before the sequestration of his estate … which has had the effect of preferring one of his creditors above another, may be set aside by the Court if immediately after making of such disposition the liabilities of the debtor exceeded the value of his assets, unless the person in whose favour the disposition was made proves that the disposition was made in the ordinary course of business and that it was not intended to prefer one creditor above another.
(2)   Every disposition of property made under a power of attorney whether revocable or irrevocable, shall for the purposes of this section and of section 30 be deemed to be made at the time at which the transfer or delivery or mortgage of such property takes place.
Section 30 deals with “undue preferences to creditors” and provides as follows:
(1)   If a debtor made a disposition of his property at a time when his liabilities exceeded his assets, with the intention of preferring one of his creditors above another, and his estate is thereafter sequestrated, the court may set aside the disposition.
(2)   For the purposes of this section and of section 29, a surety for the debtor and a person in a position by law analogous to that of a surety shall be deemed to be a creditor of the debtor concerned.
Section 31 – Collusive dealings before sequestration
(1)   After the sequestration of a debtor’s estate the court may set aside any transaction entered into by the debtor before the sequestration, whereby he, in collusion with another person, disposed of property belonging to him in a manner which had the effect of prejudicing his creditors or preferring one of his creditors above another.
(2)   Any person who was a party to such collusive disposition shall be liable to make good any loss thereby caused to the insolvent estate in question and shall pay for the benefit of the estate, by way of penalty, such sum as the court may adjudge, not exceeding the amount by which he would have benefited by such dealing if it had not been set aside; and if he is a creditor he shall also forfeit his claim against the estate.

The sequestration process is designed for the benefit of the creditors to ensure they at least get something meaningful back for the credit they extended. The courts have ruled that the minimum threshold should be that the realisation of an insolvent’s assets should equal at least 20 percent of the debt due, so creditors may receive at least 20 cents for each Rand of debt owed to them. This is known as the dividend from the proceeds of realisation of the estate’s assets.

The dividend can be paid either by the sale of any movable or immovable assets, or it may be paid in cash, either once off or by installment over several months. Thus, if the insolvent does not have assets, but earns a regular proven income, the sequestration can be done on the basis that the insolvent pays the dividend in cash, either as a lump sum, or by way of monthly payment.

As the application for sequestration affects a person’s legal status, the application for sequestration may only be brought in the High Court with relevant jurisdiction, i.e. where the consumer resides

Section 149 of the Insolvency Act – Jurisdiction of the court.

(1) The court shall have jurisdiction under this Act over every debtor and in regard to the estate of every debtor who
(a) on the date on which a petition for the acceptance of the surrender or for the sequestration of his estate is lodged with the registrar of the court, is domiciled or owns or is entitled to property situate within the jurisdiction of the court; or
(b) at any time within twelve months immediately preceding the lodging of the petition ordinarily resided or carried on business within the jurisdiction of the court.

If the consumer has disposed of or plans to dispose of any assets before he or she applies for sequestration, the following must be taken into account from the Insolvency Act.
Section 29 of the Insolvency Act 24 of 1936 provides as follows:
(1)   Every disposition of his property made by a debtor not more than 6 months before the sequestration of his estate … which has had the effect of preferring one of his creditors above another, may be set aside by the Court if immediately after making of such disposition the liabilities of the debtor exceeded the value of his assets, unless the person in whose favour the disposition was made proves that the disposition was made in the ordinary course of business and that it was not intended to prefer one creditor above another.
(2)   Every disposition of property made under a power of attorney whether revocable or irrevocable, shall for the purposes of this section and of section 30 be deemed to be made at the time at which the transfer or delivery or mortgage of such property takes place.
Section 30 deals with “undue preferences to creditors” and provides as follows:
(1)   If a debtor made a disposition of his property at a time when his liabilities exceeded his assets, with the intention of preferring one of his creditors above another, and his estate is thereafter sequestrated, the court may set aside the disposition.
(2)   For the purposes of this section and of section 29, a surety for the debtor and a person in a position by law analogous to that of a surety shall be deemed to be a creditor of the debtor concerned.
Section 31 – Collusive dealings before sequestration
(1)   After the sequestration of a debtor’s estate the court may set aside any transaction entered into by the debtor before the sequestration, whereby he, in collusion with another person, disposed of property belonging to him in a manner which had the effect of prejudicing his creditors or preferring one of his creditors above another.
(2)   Any person who was a party to such collusive disposition shall be liable to make good any loss thereby caused to the insolvent estate in question and shall pay for the benefit of the estate, by way of penalty, such sum as the court may adjudge, not exceeding the amount by which he would have benefited by such dealing if it had not been set aside; and if he is a creditor he shall also forfeit his claim against the estate.

No, you do not need to appear in court personally. An advocate will be appointed to appear on your behalf.

A Secured creditor is a creditor who holds security for the credit, such as a bond over your company's property or motor vehicle/asset finance. They have priority in the event of the asset being sold.

A Preferent creditor is a creditor who holds security for their loans, such as the creditor who granted a loan on your house or a hire purchase on your motor vehicle. Certain statutory creditors, such as the taxman, employees, and medical costs owed on your deathbed, are also preferent creditors.

Concurrent creditors are creditors who do not hold any security for the money owed to them. They stand at the end of the queue in terms of receiving any funds from the insolvent estate.

In the winding-up of your company's estate, there may be a shortfall in the general administrative cost. In this case, each creditor who has proven a claim in your insolvent estate becomes liable for the administrative cost, pro rata to the amount of their claim. Preferent creditors are only responsible for the cost of realizing the asset they hold security on.

The object of the Insolvency Act is to ensure a due distribution of assets among creditors in order of their preference. The sequestration order crystallises the insolvents position; the hand of the law is laid upon the estate, and at once the rights of the general body of creditors have to be taken into consideration.

Compulsory sequestration: Debtors who cannot pay off debts leads to creditors applying to have the debtor's estate sequestrated.

Voluntary surrender, as it is also known, means the debtor approaches the court without being forced to do so, while compulsory sequestration occurs when one of the creditors approaches the court, to declare the debtor insolvent and to separate the debtor's estate from him or her in order to secure the creditor's claim.

You must be insolvent and the court must be satisfied that your sequestration will be to the advantage of your creditors and therefore in the best interest of your creditors.

Sequestration stems from the debtor being declared insolvent. An insolvent is restricted from obtaining credit, he or she is regarded as not fit to hold certain official positions, is barred from entering certain contracts, and cannot follow certain vocations.
Once a sequestration order is granted, all civil debt legal proceedings against the debtor must seize.

The claims of all creditors are treated as one, creating what is legally known as a concursus creditorium, or a ‘coming together of creditors’ and no creditor is allowed to pursue any claims against the debtor where it may negatively affect the claims of other creditors.

A creditor’s right to recover a debt in full, is restricted and replaced by the right to prove a claim against the insolvent’s estate, in order to share with all other creditors, the proceeds of realisation of the insolvent estate’s assets.