Frequently Asked Questions

Sequestration is a legal process in South Africa that deals with personal insolvency, providing a debt solution in law for individuals to address their financial difficulties and manage their debts. It is a voluntary debt solution that can help individuals write off unsecured debt that would otherwise take many years to clear. Once sequestrated, creditors are unable to pursue individuals legally to recover debt that is still owed.

You can apply for Voluntary Sequestration if you meet these requirements: • you are unable to pay your debt installments when they are due. • your debt has been handed over to collection agencies. • you have shortfalls on repossessed assets such as vehicles and homes. • you have tried Debt Review and the installment is still not low enough to assist in managing your monthly living expenses. • you have received a summons from a Credit Providers pending a judgement. • you have judgements on your credit report. • you have emolument attachments or garnishee orders on your income. • your debt must be more than R150,000.

Sequestration typically writes off 75% of your unsecured debt, with the remaining 25% being distributed to your Credit Providers by a Trustee. The Trustee is appointed by the Master of the court to manage the distribution of the 25% to your Credit Providers. The 25% is often paid off over 18 months or through the sale of assets like financed vehicles and homes. However, this amount can vary. A key legal requirement is that the Sequestration must provide a "sufficient dividend" to Credit Providers, meaning they must receive at least 20 cents in the rand (20%) of the total debt. The difference of the (5%) or any percentage above the 20% is the legal costs the attorney charges to bring this application to court. Any Credit Provider that fails to submit a claim to the Trustee may result in the debt being written off 100%. This does not mean that the 25% is refunded to you, it simply means that the remaining Credit Providers in the application receive more money.

Shortfalls from repossessed Homes Shortfalls from repossessed Vehicles ​Personal Loans and Pay Day Loans Overdrafts and Revolving Credit Plans Credit Cards and Store Cards Tax owing to SARS Cell phone Contracts Medical Debt Arrears School Fees Other third-party Contracts

To initiate Voluntary Sequestration, an individual must employ and attorney to file an application with the High Court, accompanied by a statement of affairs detailing their assets, liabilities and creditors. A Trustee is then appointed to administer the Sequestration. 60-75% of all unsecured debt incurred up to date of the court order (the Sequestration Order) is written off. The Trustee's job is to distribute the 25-40% remaining to all Credit Providers. This can either be done by paying off the 25-40% in full using retrenchment/pension/family money or in installments paid off over 18 months. Creditors have the right to submit their claims to the Trustee. The Trustee verifies and adjudicates the claims. The 25% payable is then distributed to creditors based on their ranking and priority as stipulated by law. Once the above process is finalised the Sequestration is concluded and a Liquidation and Distribution account (L& D Account) is submitted to the Master of the Court for inspection and confirmation. This account indicates what was paid and distributed to the various parties and must be approved by the Master of the Court. An individual can apply for early rehabilitation 12 months after the Liquidation and distribution account is confirmed by the Master of the Court. The Process Application: An individual applies to the High Court for a Sequestration order, indicating their inability to pay debts. Court Order: The court will then issue an order declaring the person insolvent and sequestrates their estate. Trustee Appointed: A Trustee is appointed by the court to take control of the sequestrated estate and distribute the proceeds (25%) to the Credit Providers in the application. Liquidation and Distribution Account: Part of the Trustee’s role is to draft a Liquidation and distribution account closing off the financial state of the sequestrated individual. Master of the Court Confirmation: The Master of the court must confirm the Liquidation and Distribution account within 2 weeks of its submission. Credit Rehabilitation: An individual can apply for early credit rehabilitation 12 months after the Liquidation and Distribution Account is confirmed by the Master of the Court.

A financed vehicle legally belongs to the bank or finance company until the final payment is made on that vehicle. The bank or finance company of that vehicle is regarded as a Secured Creditor. A Secured Creditor is a lender that holds a legal claim over a specific asset, while the individual driving the vehicle pays off the value of that asset. A financed vehicle, in a Sequestration, will therefore be repossessed and sold by the Credit Providers it belongs to or by the Trustee appointed to manage the Sequestration process.

As a reminder, Sequestration writes off 75% of your debt. The remaining 25% can be paid in full or over a period of 18-24 months. A fully paid-off vehicle becomes an asset in a Sequestration and can be used as security or collateral while the Estate Fee (25%) is being paid off over the 18-2 months. The vehicle is not removed from the individual’s possession, but is taken control of by the Trustee until the 25% is settled. The Trustees are appointed by the Master of the Court to manage the claims and the distribution of the 25% to the Credit Providers as part of the Sequestration process. Failure to keep up with payment of the installments of the 25% over the 18-24 months can lead to the Trustee auctioning the vehicle to pay the Credit Providers in the application or in lieu of the missed payments in the application. Once the 25% is settled, then the vehicle is released as security or collateral.

As part of the Sequestration process, a financed home is considered an asset and is typically sold by a court-appointed Trustee to repay the Credit Providers in the application. You will likely lose your home unless you can raise the funds to pay the Credit Providers the required amount (20 cents in the rand) or negotiate a different arrangement with the Trustee. You will be given time to find new accommodation, and in some instances, can even live in the home rent free for the 3-6 months it takes to sell the property. Once sold you are given 30 days to vacate the premises.

As part of the Sequestration Process, a Trustee is appointed by the Master of the Court to manage the claims by the Credit Providers. A paid-off home is sold by the appointed Trustee to pay your Credit Providers. You will be given time to find new accommodation before the sale takes place, sometimes benefiting from living in the home rent free for 3-6 months while the sale is being finalised. The proceeds from the sale of the home are then distributed to your Credit Providers. Any remaining debt after the sale of the property is written off 100%.

As previously stated, Sequestration writes off 75% of your debt. The remaining 25% can be paid off over 18-24 months, but only if you have assets that can stand as security while you pay the 25% off. Household contents and any paid off assets, like vehicles, are not removed from your possession but can stand as security for the 25% in the Sequestration. Once the 25% is settled the household contents are released as security. If is not a requirement to use your assets to stand as security when applying for Sequestration. You can do what is called a Cash Sequestration which means that you pay the 25% in cash. This is typically done by individuals who use retrenchment payouts, the two pot system, or assistance from family to settle the 25%. The 25% can be paid off, but unlike Asset Sequestration where the court order is obtained first and then you pay the fee off over 18-24 months, we cannot obtain a court order until the cash is paid in full. If you apply for Cash Sequestration your assets are also not removed from your possession.

Rehabilitation after Sequestration will typically occur in two ways: -automatically after 10 years from the date of Provisional Sequestration Order, or -by applying to the court sooner once specific legal requirements are met, which can be as early as 4 years. The court application for early rehabilitation takes about 8–10 weeks once all requirements are met and preparations are complete. You can apply for rehabilitation sooner through the court, provided you meet specific conditions: After 4 years from the date of your granted Sequestration order. After a 12-month period has passed from the Master's confirmation of the first distribution account, provided no claims were submitted by the Credit Providers or the estate was not previously sequestrated. After 5 years if you've been convicted of a fraudulent act related to your insolvency. If you have compensated the Credit Providers with at least 50 cents in the Rand for outstanding debt also providing proof of this with a certificate from the Master of the Court. If you have paid all proven creditors in full.