By Emsie Martin
Currently people are unsure about the future and for those who now have no income, are on unpaid leave of just receiving a portion of their salaries, the future looks gloomy. If things don’t improve, which I believe won’t happen soon, there are certain options to get rid of debt. Sequestration, bankruptcy, liquidation, insolvency or surrendering your estate are in essence different terms for the same idea. However, give everything careful thought before considering any of these steps.
Apart from voluntary sequestration, you could follow other approaches to prevent you from losing valuable assets due to too much debt which you cannot pay. If in any way possible, it is better to pay the debt.
- This can be done by borrowing money from a family member (preferably not) to pay the debt against which there is security. If this option isn’t possible, you can sell some of your assets and use the money to pay off debt and in so doing make it possible to have extra money available to take care of the other debts monthly.
- Should it however have gone past this point and you do not have assets to sell, you can apply for administration. This is not the designated option for someone who owes more than R50 000.
- Another option, apart from voluntary sequestration, is to negotiate with the creditors for a decreased amount to discharge the debt. Creditors aren’t always in favour of such negotiations, but with the help of a lawyer you can give it a try.
- You can also apply for a loan to pay your debt. You will then use the amount to discharge all the debt and only repay the loan. Keep in mind that this is usually accompanied by extra interest if you use a short-term loan. It is only an option if you qualify for such a loan and take steps to prevent further debt. Unfortunately, it is not always possible to settle the full amount of the debt in this way and then you will still have the existing debt to pay off.
- Apply for debt counselling. In this way you keep your assets, but have to pay an amount monthly, which is then divided among the creditors. This option is not suitable for someone with no income. In the latter case, administration is the appropriate solution. With this solution the creditors have the right to take legal steps against you immediately should you miss one instalment or even make a late payment.
- Voluntary sequestration is the sixth option and is suitable if you have fixed assets and a lot of debt. It is also suitable if you don’t want to be under debt counselling for years to come. The interest is frozen and therefore your debt does not increase. It entails an application for you to be declared insolvent. Your estate is handed over and a curator appointed to handle the sale of the assets, as well as the distribution of the financial proceeds obtained from the sale. The creditors must receive at least 20 cents from the rand.
As soon as your intention for voluntary sequestration is published in the Government Gazette and a local newspaper, the creditors may not take any further legal steps against you. You immediately terminate any payments to them and your legal representative handles any further communication with the creditors.
After the court has approved the application for voluntary sequestration, the assets have been sold and the creditors have received their benefit, you are free from that debt. However, you have to discharge the balance, which usually amounts to about 20%, in cash or per repayment agreement. When this has been done, you can apply for rehabilitation.
Lawyers usually handle the entire process on your behalf and you will also be advised regarding the furniture, your vehicles and the rehabilitation process.