Understanding the Disadvantages of Sequestration in South Africa

1. You can not own assets during your sequestration.

When you are placed under sequestration, you lose ownership of your assets.

This includes property and any vehicles registered at NATIS.

The trustee gains control of these assets to distribute among creditors.

To work around this, some sequestered individuals use “rent-to-own” arrangements for essential items like cars.

However, this can still feel limiting, as you are no longer the legal owner of assets.

2. You may experience difficulty renting a property.

Finding a rental property during sequestration can be a challenge.

Many leasing agencies are hesitant to rent to individuals under sequestration due to their financial status.

A more practical approach is renting directly from property owners, which may require additional effort and negotiation.

3. You may feel a loss of control.

The sequestration process is highly formalized and involves interaction with lawyers, court orders, and trustees.

For people unfamiliar with these processes, it can feel overwhelming and intimidating.

Many individuals report feeling as though they have lost control over their financial decisions, as legal terms and conditions now bind them.

4. You may experience social stigma.

Unfortunately, sequestration often comes with societal judgment and stigma.

Many people perceive sequestration as a symbol of financial failure, which can negatively impact your personal and professional reputation.

Explaining your situation to others can be uncomfortable, and some may jump to conclusions without understanding your unique circumstances.

5. You may not be able to afford the high legal costs.

Pursuing legal sequestration is an expensive legal process.

The process involves legal fees, court costs, and trustee fees, which can add up quickly.

These expenses may feel like an additional burden for someone who is already in deep financial distress.

6. You must live on an only cash basis.

Once you are sequestered, you may not access loans or any credit.

This means you must adhere to a strict budget and live solely off your income or available cash reserves.

While this can be an effective way to avoid further debt, the adjustment can be difficult for those unfamiliar with living without credit.

7. Your credit rating will be damaged.

Another disadvantage of sequestration is the impact it has on your credit rating.

Being sequestered signals to lenders and financial institutions that you have been unable to manage your finances.

This negative credit score will stay on your record for several years.

After your sequestration period ends, rebuilding a positive credit score can take up to 2 to 3 years.

8. Your career may be restricted in certain industries.

Sequestration can limit your career options, especially in regulated or high-responsibility roles.

For example, you cannot serve as a Financial Advisor or an F&I professional at a car dealership while sequestered.

Additionally, some government positions require you not to be under sequestration.

Checking how this may impact your current or prospective career path is essential.

9. You may experience an emotional and mental impact.

Although not often discussed, the emotional toll of sequestration can be heavy.

It is a stressful process that can leave individuals feeling shame, embarrassment, and anxiety.

Seeking help from a Debt Strategist can be crucial in navigating the emotional challenges associated with sequestration.

Things to Consider Before Opting for Sequestration

It is important to remember that while sequestration may resolve immediate debt issues, it comes with both advantages and disadvantages.

Consulting with a Debt Strategist can help you understand the full implications and make a decision best suited to your unique circumstances.