Bank Better, Live Better

debt relief through voluntary sequestration

Realising you are over-indebted and not coping with your monthly credit instalments is the first step to becoming good for credit again.

If you aren't coping with your dept payments, but fail to seek help, you can land in trouble with your credit providers and even end up in court. Not only will this have a negative effect on your financial situation but it will also affect your future ability to borrow money. If no other debt relief options can be used, you may want to consider voluntary sequestration.


What is voluntary sequestration?

During this process you and your attorney will approach the court to apply for insolvency. It's your responsibility to prove that you cannot afford your debt any longer and to declare personal bankruptcy. It's then up to the court to review and agree to this application.


How does voluntary sequestration work?

When the court agrees that you have too much debt and that you are unlikely to pay it back, you will be declared bankrupt and voluntary sequestration becomes an option. With this court order most of your debt will be written off, including debt not in the application. Credit providers will not be able to take further action against you, such as charging interest or taking recovery action.

Under these circumstances you are legally required to sell your personal assets (your house, car, furniture, electronics, etc.) to recover all or most of the money you owe your credit providers.


When is voluntary sequestration a good option?

  • The other debt relief options are not possible
  • You can't afford your debt repayments and you have more debt than what your assets are worth

Things to note:

  • There is no minimum or maximum amount of debt you need to qualify for voluntary sequestration 
  • After the court declares you bankrupt you are legally obliged to sell your assets 
  • Because this is a legally binding process, your credit providers cannot pursue you any further
  • You'll no longer own any of your property
  • You can't enter into any contracts on your own
  • It's a criminal offence for you to apply for credit
  • You may not be a member of a closed corporation (CC) or a director of a company 
  • You're declared insolvent and won't qualify for new credit for at least 10 years, unless the court orders that you're no longer insolvent within 10 years from the date of your sequestration 
  • The court may decide not to declare you bankrupt. In that case, you’ll have to find an alternative way of dealing with your debt

Although your debt will be mostly written off, voluntary sequestration is an expensive form of debt relief. Not only will you have to pay legal fees, but you'll also lose your assets. Bankruptcy can also affect your position as a tenant, leaving you unable to find somewhere to live. Consider voluntary sequestration carefully before you begin the process.


Download Our Good for Credit Booklet

 

Was this article helpful?

you may also like...

View All Other Articles View All
credit enquiries affect your credit score

credit enquiries affect your credit score

Understand the difference between hard and soft enquiries and how they could have an impact on your credit score.

Read More
live better with our credit card

live better with our credit card

You get access to all your accounts and a credit limit of up to R250 000.

Read More
is your credit profile costing you?

is your credit profile costing you?

All credit-active South Africans have a credit profile. Find out more about credit profiles, what your credit profile is used for, why blacklisting is a myth and how you can keep your credit profile clean.

Read More
understanding interest

understanding interest

You know you pay interest on what you borrow, but do you understand it? We explain what it is and how it works.

Read More
View All Other Articles