Voluntary sequestration (Insolvency)
This entails an application made to the relevant High Court to have all your assets realised and the proceeds divided amongst all your creditors in terms of the Insolvency Act, after certain costs have been taken into account.
Once the application is granted all civil legal proceedings against you are suspended. The sheriff cannot attach or sell any of your assets, and your employer is prohibited from deducting money from your salary for Garnishee Orders. Ownership of your assets now vests in your Trustee although you still have possession of the assets. A Trustee is a person appointed by the Master of the High Court to administer your insolvent estate. The Trustee will have to realise (liquidate) your assets by selling them back to you or by auction.
The proceeds derived from your assets are distributed amongst your creditors in terms of the Insolvency Act, after certain administration costs are deducted. Your creditors are forced to write off any outstanding debt as unrecoverable and cannot take any further legal action against you. Sequestration must be to the advantage of the creditor’s and there must be sufficient value in the estate to cover the costs of sequestration.
The effects of sequestration last 10 years from the day of granting and will adversely affect your credit rating whilst it lasts. You may, however, apply to the high court for a rehabilitation order in certain cases before the 10 years has elapsed.
The administration costs include the attorney’s taxed bill of costs, the trustee’s fees and disbursements and the Master’s fees. These costs can easily amount to R25 000 or more.