How Long does Sequestration Take in South Africa?

Considering sequestration as a debt relief option is never an easy choice. If you are thinking about sequestration in South Africa, the duration is also one of the main concerns. People wish to know how long they will be under financial restrictions and when they can start rebuilding their lives. Let us see how long sequestration takes in South Africa.

How long does Sequestration take in South Africa?

In South Africa, the length of the process depends on the type of sequestration, the court involved, and how complex your financial affairs are.

In South Africa, sequestration can take anywhere between 6 months to 4 years if you apply for early rehabilitation using specific options available in law. If you do not exercise the options available to you then rehabilitation occurs automatically by law after 10 years.. While the court process to rehabilitate is relatively straightforward and quick, the full legal effects of sequestration can last an additional 6 months after the rehabilitation order is granted. Why? While your credit report and score may be restored, the various ratios that credit providers look at, when they make a decision to grant you credit, can take an additional 6 months to improve. These include payment history and also credit utilisation ratios.

That's for the short answer. However, let's break down why the timeframes vary so widely.

Understanding the Types of Sequestration

The biggest factor is whether the sequestration is voluntary or compulsory.

Voluntary Sequestration or Voluntary Surrender happens when an individual applies to the High Court to be declared insolvent. This route is usually more predictable because the debtor (you) initiates the process, an attorney is appointed to draft the relevant legal documentation and there is also a benefit to the credit provider. The benefit is that while 75% of your debt will be written off, the creditor will still receive 25% of the money that is owed to them. This 25% can be paid upfront as a lumpsum by utilising money that a family member gives you, retrenchment payouts or the pension two-pot system. Alternatively, the debtor (you) can opt to pay the 25% off over a period not longer than 24 months. Logically if the lumpsum is paid then the debtor (you) can rehabilitate sooner than if they choose the option to pay off the 25%.

Compulsory Sequestration is brought by a creditor who applies to the High Court to have a debtor declared insolvent. These cases often take longer for various reasons, usually due to the conflicts between creditors and debtor(s).

Typical Sequestration Timeline

Although every case is unique, most sequestrations follow a similar pattern.

1. Preparation and Notice (2-6 Weeks)

Before either the creditor or the debtor applies for sequestration, they must publish a notice in the Government Gazette and a local newspaper in the province. Documentation must also be prepared and includes a signed statement of affairs, an affidavit confirming the financial situation, and a list of debts. A sequestration attorney will draft the documentation and attend to the other processes on their client's behalf.

2. Provisional Sequestration Order (Court Hearing)

The timeframe depends on how quickly you receive the sequestration order. Usually, the sequestration order is granted on the same day as the hearing. However, the stamped Court Order may take approximately 2 weeks to be provided to you and or the attorney on record.

3. Appointment of the Trustees (6-12 weeks)

Once sequestrated, the Master of the High Court appoints a trustee. The trustee takes control of the insolvent estate, sells assets if applicable, and distributes funds to creditors. The administrative phase can take 6-12 months or longer, depending on the following factors.

• The number of creditors

• The value and type of assets

• Whether there are disputes or investigations

• How cooperative the insolvent person is

  
  

During this period, the insolvent person remains under certain legal restrictions.

4. Meetings with the Creditors to finalise claims

After the provisional order is granted and trustees appointed, creditors are required to submit claims. If no valid objections or claims are raised, the court grants a final sequestration order and so this is when rehabilitation can occur within 6 months. If claims are submitted then there are 2 meetings that must be held with creditors to finalise claims. This is where the process can take longer.

5. Liquidation and Distribution Account

Once the meetings with the creditors are complete, a liquidation and distribution account must be drafted and submitted to the Master of the Court for confirmation. Once the Master of the Court confirms this account early rehabilitation can be applied for 12 months after the confirmation date.

If the debtor (you) paid a lumpsum to settle the 25%, then rehabilitation can be applied as early as 24 months after the sequestration order is granted.

If the debtor (you) is paying off 25% off, than early rehabilitation can only occur once the 25% is settled, liquidation and distribution account confirmed and 12 months have subsequently passed after the confirmation of the liquidation and distribution account by the Master of the Court. This can take 4 years to complete.

Credit Rehabilitation

In South Africa, an insolvent person may apply for rehabilitation, usually 6-48 months after the date on which the final sequestration order was granted - various terms have been discussed above.

Credit Rehabilitation focuses on restoring your creditworthiness, which means you are ready to be a part of the economy once again.

If no application for early rehabilitation has been made, then Credit Rehabilitation occurs automatically after 10 years.

Final Thoughts

Sequestration may be a debt relief solution, however, it is not an instant relief. You should only consider sequestration if you have exhausted all other options to settle your debt. It provides a structured path towards financial relief, yes, but still requires a certain timeframe before you can be declared credit worthy again.

However, if you consider your current over-indebtedness, costs of legal fees and interest charges and the timeframe it would realistically take to settle debt, it would take much longer to become credit worthy if voluntary sequestration did not exist. There is also no other solution that can write off 75% of your debt - not even if discounts were offered by the credit providers/collection agencies. For some consumers this may be the only way out if they are currently insolvent.

Understanding the process and the timeline upfront helps set realistic expectations and makes the process far less overwhelming. Sequestration is a legal process and so an insolvency practitioner/ attorney must be employed to assist you with an assessment and the court application. At Solvendi, our expert team of insolvent practitioners and attorneys can streamline the process for you.

Contact us for a free financial assessment and advice today. Disclaimer: This article is intended for general informational purposes only and should not be interpreted as legal advice. Any actions taken based on the information provided are done so at your own discretion. Solvendi cannot be held liable for any outcomes resulting from such actions. We encourage you to consult with us directly before making decisions solely based on the content of this article.

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Contact us to discuss your current situation and receive a free detailed assessment of how the process works and what your costs will be. We have legal experts with 20 years experience that can guide you through the process. Our main aim is to be as informative as possible. Let's Chat.

If you require advice with regards to Sequestration, Business Liquidations, Insolvency, Bankruptcy or Credit Rehabilitation kindly contact SOLVENDI as follows:

National: 087 220 0710

Head Office: 010 880 7589

Email: consultations@solvendi.co.za 

Website: www.solvendi.co.za