Sequestration Questions

Question Answer
Most Importantly; your house -
Will I lose my house? Unfortunately YES.There is no way to save your property in a sequestration either bonded or paid up.
The bank is going to start legal action against me soon because my bond is in arrears. Contact us to discuss your options during this process
And your car –
My car is on HP at the bank? Unfortunately Yes. You will lose your car.
My car is paid up and registered in my name? You will keep your car and use the value towards your contribution.
My parents (brother, sister, friend) bought my car and the finance is on their name? You will continue to pay the car payment in full and you will not lose the car.
And your Insurance Policies
Can they take my Pension policy held by my employer? NO. Any policy or funds that fall under the Pensions Act is protected by the Insolvency Act.
I have ceded my policy to a creditor? A policy that has been ceded to creditors will become the property of your creditor and they can deal with those policies in accordance with their policies.
I have a retirement annuity with a large insurance company? A retirement annuity is protected against your insolvent estate.
I have a claim against someone for a personal injury and expecting it to pay out soon? Any funds that pay out to you in terms of a claim for personal injury is protected against your insolvent estate.
I have a Unit Trust account of approximately R500K? Sorry you can’t keep it. The Trustee will use these funds towards your creditors.
General Questions –
Can I be too poor to sequestrate? Once again unfortunately yes;either by not affording the contribution or currently unemployed. You need to prove an ‘advantage’ to the creditors before the court will grant the sequestration.
What is this ‘advantage’ or ‘contribution’? It would take an Advocate hours to explain this but basically the ‘advantage’ is the creditors get paid, on average, 25 cents to a rand of debt. The contribution is the creditors ‘advantage and the administrative costs of the estate.
Can someone take my salary? The simple answer is NO. Once there is a sequestration court order then no creditor may attach your salary either with a garnishee or salary stop order. However there are creditors that will ‘money grab’ out of your bank account. We will advise you during the consultation on how to deal with this.
Will I lose my furniture? If your furniture is sill financed then the creditor has first claim and will reposes your furniture. Should all your furniture be paid up and ownership held by you then the worst case scenario is that your furniture is appraised, and you have to buy back your furniture from your Insolvent Estate.
What will happen to my cell, printer and any other rental contracts? Nothing. Rental contracts do not get cancelled with a sequestration. You carry on paying and maintain a good payment record. You can however not after you have elected to keep the contract, stop paying a few months down the line after sequestration and then rely on the sequestration..
Should I still pay maintenance to my ex-wife/husband? Yes. The sequestration order does not cancel your maintenance order. You may also approach the maintenance court to reduce you amount.
What about my Parking tickets, Television licenses or speeding fines? All of these items are excluded from the sequestration and you will still need to pay them.
May I apply for sequestration while I am registered for Debt Review / Counseling? Most certainly you can. Contact us to discuss your options during this process.
Will I be able to open a bank account after my sequestration? Yes. You could even get a cheque account depending on your income. You will however not get an overdraft facility or loan. Contact us to discuss your options during this process.
Can my employer fire me because I am declared insolvent? There are certain positions which are excluded in the South African Law for example; you are not allowed to be a Director of a company or Actuary. With regards to your employment, you can only be fired, if there is a condition in your Letter of Appointment that you are not allowed to be an insolvent while in the employ of your employer
Should I keep on paying my creditors after I have decided to sequestrate? No. Under South African law an individual is not allowed to prefer one creditor above another.
What do I say at SARS? After you have been sequestrated SARS must issue you with a new tax number. With this new tax number you start on a clean slate with SARS. All credits and debits that were due to and from SARS before date of sequestration stay in your insolvent estate.

Myth Busters

I will wait for my creditors to sequestrate me.

Answer – A creditor is not keen to bring a “hostile” Sequestration Application, because it is normally cheaper for them to follow execution steps via the Sheriff. Hostile sequestration Applications are normally brought against debtors who have very large estates and have hidden their assets from creditors.

Statement – My friend in HR said she/he will not sign the garnishee on my salary

Answer – A garnishee is a court order against the Employer.  The Creditor can hold the Employer liable for balance on the garnishee and take legal steps against the Employer.  This means you and your friend can lose your jobs when the boss finds out.

Statement – I can go to court myself to sequestrate. I don’t need an attorney.

Answer – Not likely!  A sequestration order can only be brought before a High Court.  Only an Advocate can appear in a High Court.  There are other legal processes that also deal with debt and all require some form of representation. 

Statement – I will stop paying my debt and the creditors can’t do anything.

Answer – This is very dangerous.  The risk here is a garnishee on the individual’s salary.  Once a garnishee is signed on a salary then the NCA does not apply.  I have seen garnishee’s for 3 times the original outstanding balance amount and fees are still added monthly.

There is no recourse to stop this garnishee, other than sequestration, or to curtail the monthly expenses.

Statement - Debt Review / Counseling will cost me less a month.

Answer – Possibly yes because the debt is being repaid over a longer period. Sequestration is limited to a legal process and has a time limit.  However in a sequestration the balance of debt is written off and not repaid in full. In the short term the monthly payment may be less but over the duration the repayment is considerably more.

Statement – My lawyer can write a letter to all my creditors to explain my financial situation and the creditors will write off my debt

Answer – Maybe but maybe not.  Businesses are in business to make money.  If they wrote off all the bad debt there would be no business. Sometimes the client might get lucky with a creditor and have a smaller amount written off but not in general.  That is why our country has laws to govern the processes of debt.

Statement – My friend did his sequestration for free, not a cent paid.

Answer – The attorney could complete the legal process with no charge possibly for a friend.  However when it comes to the settling of the debt by the Trustee there will need to be an advantage for the creditors.  In other words they need to be paid.

Statement – I am not scared of judgments, I already have a few on the credit bureau.

Answer – Some creditors have a policy of taking judgment on a client and then closing the file.  Other creditors take the collection process to a garnishee court order. 

There is no recourse to stop this garnishee, other than sequestration, or to curtail the monthly expenses.

Statement – I will give my car back to the bank and I won’t owe anything.

Answer – This depends on the value of the car and the outstanding balance.  Should the bank take your car and resell it at a loss.  You will get a call from the bank for the shortfall.  The bank will first attempt at an unsecured loan and if not paid then it will go to judgment.

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