Sequestration

Sequestration

In South African law, insolvency (the Insolvency Act No 24 of 1936) refers to a state of diminished legal capacity imposed by the courts when a person’s estate is sequestrated. This is when a person’s estate can no longer pay his or her debts due to uncontrollable circumstances and is surrendered by court order. Natural persons’ estates, partnerships, and trusts can all be sequestered. A company’s or close corporation’s estate is not sequestrated but instead placed under liquidation.

Who meets sequestration criteria?

Even if someone meets the insolvency criteria, a person who has insufficient assets to pay his debts is not considered insolvent for legal purposes unless a court order has sequestrated his or her estate. A sequestration order is a formal declaration of insolvency by a debtor. The order is granted either at the debtor’s request, known as voluntary surrender or at the request of one or more of the debtor’s creditors, known as compulsory sequestration.

The goal of giving up your estate is to pay off your debts. It is not, however, a free pass. In the process, you will lose your immovable property. In South Africa, voluntary sequestration is not possible if the sale of the assets in the surrendered estate does not generate enough cash to ensure that each creditor receives at least 20 cents from the rand profit. Furthermore, the assets must be sold for enough unencumbered funds to cover the cost of the sequestration process.

What is the goal of sequestration?

Sequestration can even be considered a comfort for many South Africans in this situation because it allows them to have up to 80% of their debt alleviated. Creditor harassment is also stopped nearly immediately, and any pending judgements are delayed. If you are a consumer battling to keep food on the table, petrol in your car, and keep creditors satiated, the information above should come as a welcome relief.

Who can apply to get sequestrated?

You can surrender your estate yourself or have it surrendered on your behalf by an appointed counsel. An executor of a deceased estate is eligible to apply. If you and your spouse are married in community of property, you must both apply as you have a joint estate. We recommend discussing this with one of our attorneys at Pamela Waters-Oosthuizen to find out what best suits your individual needs.