Role of an Insolvency Practitioner during Bankruptcy in South Africa

Whether sequestration or company liquidation, an insolvency practitioner plays an important role in these legal processes. Insolvency Practitioners, or IPs, help you navigate the legal processes during your financial distress. In this article, let us understand the role of an insolvency practitioner during bankruptcy in South Africa.

Role of an Insolvency Practitioner (IP) during Bankruptcy in South Africa

Bankruptcy is a structured legal process to address insolvency. In South Africa, bankruptcy and sequestration mean the same thing. It is a voluntary debt solution that can help individuals write off unsecured debts. To declare yourself insolvent, you must seek a professional and certified insolvency practitioner in South Africa.

This is where Solvendi can help you. Our team of expert attorneys and registered insolvency practitioners (IPs) can help you understand your situation and represent you in the court during the process.

Let’s see the role of an insolvency practitioner during bankruptcy in detail.

Assessing Financial Circumstances

The very first thing an IP/attorney does for you is assess you—the debtor’s—financial position. This includes assessing a client’s assets and liabilities, reviewing income streams and cash flow, identifying causes of financial distress, and understanding creditor relationships and priority claims.

Furthermore, they will also assess debt review records, if any, and consider if bankruptcy is the most appropriate route. An insolvency practitioner provides informed advice. This helps a debtor opt-in for a legal process that best suits their circumstances.

Acting as Trustee for the Estate

An insolvency practitioner may become the trustee of the debtor’s assets after the final order of sequestration/bankruptcy has been received. In this role, they hold significant legal authority and responsibility. Their core responsibilities include the following:

1. Taking Control of Assets

First and foremost, the insolvency practitioner takes custody of debtor’s assets to secure them for fair distribution. This includes cataloguing and valuing all assets, safeguarding property from dissipation, and selling non-exempt assets to raise funds.

2. Investigating Conduct and Financial History

A central part of an IP/attorney role is to investigate the debtor’s prior conduct. They assess whether the debtor acted responsibly or misconducted. Misconduct may include preferential payments or concealment of assets. It is the IP’s responsibility to bring such irregularities to light. Such irregularities make the bankruptcy process complicated.

3. Communicating with Creditors

As an appointed trustee, the insolvency practitioner is the main point of contact for creditors, ensuring transparency throughout the bankruptcy process.

The first and foremost? Conducting meetings with creditors, responding to their queries and verifying claims. A total of two meetings are held with creditors to finalise the claims. 

They treat all creditors fairly and impartially, adhering to strict regulatory guidelines. By maintaining clear communication, the IP helps minimise disputes and ensures the process remains efficient.

4. The Liquidation and Distribution Account

Upon the finalisation of the creditor meetings, the IP submits a Liquidation and Distribution account (L&D account) to the Master of the Court. Upon approval of the court, they distribute the proceeds according to the ranking of creditors.

They ensure that distribution complies with the legal framework and that all actions are properly recorded for accountability.

Credit Rehabilitation

Once the liquidation and distribution account is confirmed by the Master of the Court the IP/attorney will also ensure that the debtor (you) can enter the credit market once again. This occurs 12 months after the liquidation and distribution account is confirmed by the Master of the Court. The IP/attorney will return to court to obtain an early credit rehabilitation order which will clear the sequestration/bankruptcy notice from the credit report. Once this is achieved the credit score is restored and must be improved over a period of about 6 months before obtaining large ticket items like vehicles and home loans. The IP/attorney will explain how to achieve this.

You can read more about this process in our article: https://www.solvendi.co.za/post/let-s-understand-credit-rehabilitation-in-south-africa

Conclusion

In summary, the insolvency practitioner plays a multifaceted role in the sequestration/liquidation process in South Africa. They are an advisor, investigator, administrator, mediator, and trustee. Their critical involvement ensures the sequestration/liquidation process is fair, efficient, and legally compliant according to the Insolvency Act 34 of 1936. They offer protection to creditors and debtors as per the legal framework, and help the debtors navigate one of the most challenging financial situations of their lives.

It is usually a debtor that seeks an insolvency practitioner regarding their out-of-control financial situation. If you are in need of an insolvency practitioner, our team at Solvendi is ready to assist you any time. Kindly give us a call for more information or booking a free assessment with us.

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