There are two different types of sequestration in South Africa.
One is voluntary sequestration and the other is compulsory sequestration.
Generally, sequestration in South Africa refers to an individual giving up his/her estate to the High Court because they are unable to pay for all their debt. When an individual undergoes sequestration they are declared insolvent. A person can be declared insolvent if their liabilities exceed their assets. Once an individual or trust is under sequestration, a Curator or Trustee is appointed to manage the sale of the assets to the creditors.
With compulsory sequestration, when a consumer is unable to pay their debts, a creditor can apply for compulsory sequestration (surrendering of the consumer’s estate) in order to recover some of the debt owed.
With voluntary sequestration, an individual can apply to surrender their assets to The High Court
Rehabilitation basically means that your status of being declared insolvent is cleared.
Someone can either be rehabilitated automatically or by way of a court order. If it happens automatically, it will happen after 10 years. If it happens by court order, the person should approach the attorney who helped with sequestration.
An individual or trust can undergo sequestration, but a company can undergo liquidation.
You can get an idea of whether or not you will qualify for sequestration if you can’t afford to pay your current debts. So, list your current income and expenses. If you aren’t able to pay for your debt with your current income, you may be eligible for sequestration.
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If you sell your assets, your creditors should be able to receive at least the minimum benefit of that sale through auction.
The sale of your assets should be able to pay at least 20 cents for every Rand to each creditor.
Debt counselling, also known as debt review, is an alternative debt relief measure that someone who is over-indebted can make use of.
Read: Debt counselling in South Africa explained