The South African Insolvency Act is in place for individuals who are suffering from high levels of indebtedness to be able to voluntarily declare their own insolvency, or become subject to automatic insolvency if they are unable to pay their debts. Voluntary insolvency is otherwise known as voluntary sequestration, and declaring oneself insolvent is a good way of removing all debts. But it is not all fun and games once insolvency is declared. Here are some of the advantages and disadvantages of voluntary sequestration.
Advantages of Sequestration
Upon entering the sequestration procedure all credit being paid by the debtor is immediately stopped. No creditor is favored in this regard and no payment can take place after the application has been made. Notice via gazette is distributed so that all creditors have the necessary information in place to be able to cancel a debit order. If a garnishee order is being respected, the order will only be cancelled once the court has accepted the insolvency application.
Sequestration is considered a private matter, so no one besides a person’s creditors, the courts, and legal representatives need know about the insolvency. Neither will one’s monthly income be affected, as this is considered necessary for the individual to rebuild his/her estate.
Disadvantages of Sequestration
Firstly, an individual has to prove to the courts that a sequestration would ultimately benefit the creditors rather than the individual. This is often the case whereby the individual is completely bankrupt. In this respect an individual often hires the help of a legal representative to prove his case to the court.
Sequestration will also create bad credit rating for the individual. A negative credit rating will mean that the individual will not be given credit or will not be able to take any loans out until he/she has been rehabilitated.
The whole sequestration process can take many years, and only once it is completed may the individual approach the courts so that he/she may have their solvency rating granted back to them. Rehabilitation is another process that needs to be made, and once rehabilitated the sequestration status will be removed.
If you are applying for voluntary sequestration make sure that you contact a lawyer or attorney who is specialized and has experience with matters involving insolvency. Make sure you contact Ivan Zartz Attorneys today!