1. She must prove that her debts are actually more than the value of her assets.
2. She must have enough assets to pay the costs of the sequestration application.
3. She must prove that the sequestration will benefit the persons and/or businesses she owes money to i.e. they must get paid (at least something) if her estate is sequestrated.

1. The sequestrated person’s credit record will get a blow as he/she will be blacklisted at credit bureaus and lose their creditworthy status.
2. The sequestrated person can’t borrow money or incur any other debt until he/she is rehabilitated. The sequestrated person will qualify as being rehabilitated when declared as such by the Court, which can happen four years after the sequestration date or sometimes sooner. If the Court does not declare the sequestrated person rehabilitated, he/she will automatically become rehabilitated ten years after his/her sequestration date.
3. If a person’s estate is sequestrated, it may lead to prohibition of membership of certain professional bodies until he/she is rehabilitated, or even future exclusion from certain professions.

1. In the case of a natural person becoming insolvent, the person himself/herself may apply, or his/her representative.
2. Where spouses are married in community of property, both spouses must apply for voluntary sequestration at the same time.
3. The partners in a partnership who are resident in South Africa or their representative may apply for voluntary sequestration.
4. When a deceased estate is insolvent, the executor of the estate may lodge an application for voluntary sequestration.
5. The curator (curator bonis) of an estate where the individual is unable to handle his/her own affairs e.g. if the individual is mentally unfit.
6. An insolvent trust.

References:

• http://www.debtbusters.co.za
• http://www.findanattorney.co.za
• http://voluntarysequestrationprocess.co.za
• http://www.conlonlaw.co.za
• http://dlbmattorneys.co.za

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The applications are similar and although there are some different requirements for each, the result is the same.

Voluntary surrender

Voluntary surrender refers to the process whereby a natural person can make an application to place him/herself under an order for sequestration.

A person is insolvent if his/her liabilities exceed his/her assets. In such a case he/she can apply for voluntary surrender of their estate. Anybody can apply for voluntary surrender at any stage as soon as he/she is insolvent, even if they have been or are under debt counselling, for example.

The person who wants to sequestrate him/herself, will depose to an Affidavit which explains why he/she claims he/she is insolvent. This will be drafted by the Attorneys who will bring the application on behalf of the Applicant. As soon as the Affidavit is signed, the application will be issued at Court and a Court date is assigned. The Applicant does not have to appear in Court as the Advocate appears on his/her behalf.

If the Court grants a provisional order on the first Court date, the matter will be postponed for approximately one month. During that month notice will be given to all creditors, and if on the return date no-one has opposed the application, the order will be finalised and the Applicant’s estate will be sequestrated.

Compulsory sequestration

Applications are also made by way of a Court application; however, in this case the Applicant will be a creditor of the debtor. If it is a creditor with whom the debtor does not have a good relationship, we refer to it as an “aggressive” sequestration (for example the bank).

However, the banks seldom bring sequestration applications against the average debtor as it is much cheaper and easier for them to follow the collection procedures: attach property and sell it and/or attach your salary.

If it is a creditor with whom the debtor has a good relationship, we refer to it as a “friendly” sequestration (for example a family member or a friend to whom you owe money).

Aggressive (“unfriendly”) sequestration

Where an unfriendly creditor brings a sequestration application against a debtor, we refer to it as an aggressive sequestration. It is also a forced sequestration as opposed to voluntary surrender.

The creditor who brings the application must have established a claim against the debtor; in other words, the debtor must indeed owe the creditor money. A second requirement is that there must also be a benefit to creditors. Thirdly, the debtor must have committed an act of insolvency.

If a creditor brings an aggressive application against a debtor, the debtor can oppose such an application if he/she is not insolvent or if there is another reason why the order should not be granted.

Process for “unfriendly” and “friendly” sequestrations

The process for both these applications is the same and it is only the Applicant that differs.

As with voluntary surrender, an Affidavit will be given by the creditor to explain why he avows that the debtor owes him/her money. He will attach proof thereof (contract/statement) and also proof that the debtor has committed an act of insolvency (where the debtor has written a letter to say that he/she cannot pay the debt). In both instances the Applicant must prove that there will be a benefit to creditors to have the debtor sequestrated.

Once the Affidavit has been signed, the necessary documentation will be drafted, issued at Court and a Court date assigned. As soon as this is done, the documents will be served on the debtor, employees of the debtor, Master of the High Court and the South African Revenue Services by the Sheriff. The provisional order should also be given to all creditors above R5 000.00 by way of registered post. If the application is not opposed, a final order will be made for the sequestration of the debtor/Applicant.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted. (E&OE)

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