How to Apply for Bankruptcy in South Africa?

Bankruptcy provides you with the debt relief you seek when you are neck-deep in debt and see no other way out. It is the way to go if you are genuinely unable to meet your unsecured debt obligations and repayments. Bankruptcy is a voluntary debt solution that can write off your unsecured debt and shortfalls. Let's see how you can apply for bankruptcy  in South Africa.

What is Bankruptcy in South Africa?

Bankruptcy is a legal process that provides you with relief from most debts and allows you to make a fresh start. You can either enter into voluntary bankruptcy, or your creditors may force you into declaring bankruptcy. Bankruptcy normally lasts for 36-48 months.

Bankruptcy and Insolvency go hand-in-hand, yet they are different.

Insolvency is a state of economic distress where the debtor may find it difficult to meet their debt obligations or repayments. Bankruptcy, on the other hand, is a court proceeding in which a court decides how a debtor may deal with unpaid obligations.

An insolvent individual may not necessarily be bankrupt if they are able to get themselves out of the situation they are in, but a bankrupt individual is definitely deemed insolvent by law.

How to Apply for Bankruptcy in South Africa?

To apply for bankruptcy, you must meet the following requirements.

• You cannot pay your debts when they fall due.

• The debt has been handed over to collection agencies.

• You have shortfalls on assets such as vehicles and a home that has already been repossessed.

• The Debt Review and negotiated instalment are still not low enough to assist in managing your monthly living expenses.

• You have judgments on your credit report and emolument attachments on your income.

Now, let's see how you can apply for bankruptcy in South Africa.

First and foremost, you cannot initiate this process all by yourself and so you will have to seek an insolvency practitioner's help. That's where we come in. Our expert insolvency practitioners will assess your situation and advise on the best course of action.

Statement of Affairs and Reserving a Court Date

Your bankruptcy attorney will do everything on your behalf. An assessment is conducted to determine the best solution. Once questions are answered and permission to proceed is granted, the attorney will attend to all legal matters. These include drafting the court documentation, namely a statement of affairs and founding affidavit. The legal documentation is certified in front of a Commissioner of Oaths. These certified documents are used to submit the notice of motion to the court which reserves a date and time on the court roll for the hearing.

Notification to Credit Providers

Your intentions to apply for bankruptcy in South Africa must be notified to all the relevant creditors and entities involved. SARS, the Master of the Court, and your Credit Providers will be informed of your intention. This is done via publishing a public notice in the Government Gazette and a local newspaper. This is regarded as the starting point of the process and you are protected from further legal action from this point onwards. Namely, 28 days before the court date.

Additionally, the attorney will also send written notice to the credit providers and SARS via email or registered mail in line with the consent to service of that specific provider. Upon submission of this notice, the bankruptcy process truly begins. This also implies that all the payments to the credit providers must stop, and they cannot take any legal action against you.

The Statement of Affairs and the Court Hearing

Your final statement of affairs will also be submitted to the Master of the Court. The statement includes the following.

• The client's income and expenses.

• A list of credit providers, their contact information, the outstanding debt balance and interest, and monthly instalments. And lastly,

• A Founding Affidavit that confirms the truthfulness of the information. This is signed by the Commissioner of Oaths.

The credit providers are allowed to inspect any information presented in the Statement of Affairs for a limited time. Once everything is in order, an advocate will represent you in court. A Trustee is appointed by the Master of the Court, once the sequestration order is granted, and will meet with the credit providers to finalise claims as well as oversee the distribution of benefits to credit providers.

Conclusion of the Order

The Trustees will meet with your credit providers regarding their claims and will also discuss what they can expect to receive as a benefit - usually 20% of the total debt owed. There will be two meetings at a minimum. Your installment over 18 -24 months will begin until the 20% is settled. Once the 20% is settled a Liquidation and Distribution (L&D) account will be submitted by the Trustees to the Master of the High Court for inspection. Once confirmed by the Master of the Court the sequestration process is done. You can rehabilitate 12 months after this confirmation.

Once the account is submitted, you should consider getting a new tax number for the tax benefits and refunds. Apart from that, you can apply for credit rehabilitation after 36-48 months which will result in you becoming credit worthy again. We also assist you with this process once the time comes.

Final Words

This is how you can apply for bankruptcy in South Africa and how the process works. All of this must be done via an insolvency practitioner. The process above takes 4 years to complete before you are credit worthy again.

To get a free assessment and advice, we highly recommend filling out this form and getting in touch with us for more information.

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.

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