Sequestrations

Halse, Havemann and Lloyd has been practicing since 1967 and has firmly established itself as one of the leading firms in Kwazulu- Natal and Gauteng.

In this day and age financial hardship is being experienced by many persons. It has recently been statistically proved that a large percentage of the population of South Africa is in arrears with payments due by them to credit providers.

It has become a major task for the normal household to keep heads above water and meet their financial monthly commitments. More often than not, through no fault or neglect on the part of a person, he / she finds himself / herself in dire financial straits which tend to become worse and worse as time progresses. This may result, ultimately, in a point of no return when the prospects that a person may be able to settle his / her debts in full had become impossible.

We advise clients on what to do under those circumstances – there are a variety of measures that people under financial stress may take to regulate the situation in which they find themselves, such as debt counselling, but also sequestrations which involves an application to the High Court for the estate of a person to be sequestrated.

A Court can make an Order on the basis that a person is able to cover the costs of sequestration and is able to prove that a dividend of 20 cent in the Rand would accrue to concurrent creditors. If a person does not have sufficient assets to liquidate to reach the 20 cent in the Rand target, then his / her future income may be pledged to the extent that he / she can financially afford to do so, to meet the 20 cent in the Rand requirement over a period of time (by monthly instalments) – our firm has recently established a precedent in this regard in the High Court, Durban.

 

Advantages of Sequestration

  • Once the Notice of Intention to apply for voluntary sequestration is published, creditors may no longer take any legal steps and all existing legal actions have stayed until the Court has ruled on the Application and so the Applicant is no longer harassed by creditors or be obligated to pay them until the Court has ruled on the Application;
  • Once the sequestration Order is granted a trustee is appointed to administer the estate and to take possession of the estate for distribution to creditors.
  • However, certain assets which are required to maintain a decent standard of living, do not form part of the insolvent estate
  • Garnishee Orders on salary are cancelled;
  • All interest on outstanding debts is frozen and debts therefore do not increase by added interest;
  • Effectively, 80% of the total debt is written off and extinguished;
  • A Trustee is appointed to administer the estate – the responsibility passes to him / her;
  • Income which is required to maintain a decent standard of living does not accrue to creditors

Disadvantages of Sequestration

  • The sequestrated person’s assets are sold for distribution to creditors;
  • The sequestrated person is disqualified from being a director of a company or a managing member of a close corporation;
  • The sequestrated person may not hold certain financially responsible- and government positions;
  • The sequestrated person may not enter into a credit agreement without the consent of the Trustee;
  • The sequestrated person is listed at credit bureaus as a sequestrated person.

NOTE: SEQUESTRATION IS TEMPORARY – EMINENT REHABILITATION RESTORES A PERSON’S STATUS BEFORE SEQUESTRATED FULLY, IN ALL RESPECTS.

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