How Does Rehabilitation After Sequestration Work?

After you’ve been sequestrated after insolvency, you can apply to the court for a rehabilitation order to declare yourself no longer insolvent. After you’re rehabilitated, you can apply for credit and hold directorship positions in companies, whereas you can’t under sequestration, as you’re deemed financially irresponsible.

You’re automatically declared rehabilitated 10 years after your initial sequestration date; however, if you want to be financially rehabilitated before that, you can apply for a rehabilitation order, which will reflect on your credit report. It’ll show that you’ve been rehabilitated and that you may apply for credit.

This post discusses when you can apply for rehabilitation, how to apply, what happens after, and how Credit Rehab can be of assistance.

When to Apply for Rehabilitation

Usually, you can apply for rehabilitation four years after the date of your sequestration, but earlier if the court allows it. Section 124 of the Insolvency Act 24 of 1924 sets out when you can apply for rehabilitation:

• When your creditors accept an offer of compensation no less than 50 cents to every rand or that you’ve deposited at least 50 cents of every rand you owe your creditors.
• Four years after you’ve been sequestered or at the recommendation of the Master of the High Court
• If no creditor has submitted a claim against you or your estate six months after your date of sequestration and you haven’t been convicted of a fraudulent act, you can apply to be rehabilitated.
• Once you’ve paid all claims against you.

Let’s discuss how you can apply for rehabilitation.

How to Apply for Rehabilitation

Here’s a comprehensive breakdown of how to apply for rehabilitation after sequestration.

Notice in the Government Gazette

First, you have to provide notice of your intention to rehabilitate in the Government Gazette, at least six weeks before you plan to rehabilitate. There’s a prescribed form you have to use to give notice called Form 6, mentioned in Regulation 5 (1). Make sure your notification is permitted by your court of choice.

You must also give notice to the Master of the High Court and your Trustee, filed by the registrar of the court.

Your Trustee Reports to the Master

If your Trustee doesn’t think you’re fit to be declared solvent, they have to report any facts and evidence that would justify the court postponing or refusing it. Otherwise, they must submit an affidavit that says you’re fit to be solvent again.

Pay Securities

Per section 125 of the Act, you must pay an R500 deposit to the registrar of court security for any opposition the court may make. This has to be paid at least three weeks before your court date.

Submit an Affidavit

You must submit an affidavit stating that:

• You completely surrendered your estate
• You didn’t grant or promise a benefit to any creditor and not others
• You didn’t secretly make an agreement to avoid dissuading your trustee or creditors from approving your rehabilitation agreement

The affidavit must include a statement of your assets, liabilities, and earnings at your court date with your household’s total earnings. You should also include:

• Dividends paid to your creditors
• Any assets available for realisation and their value
• The total amount of the claims against your estate

You should also state that your estate has never been previously sequestered and that you haven’t rebelled against any specifications of the Insolvency Act. This oath must be sworn before a commissioner of oaths or your attorney.

Report by the Master

The Master of the court has to present any facts relevant to your case and report any negative facts your trustee has highlighted. They have to mention your trustee’s report, even if there isn’t anything negative in it.

Application to Court

On your court date, the court must have:

• Your notion of rehabilitation supported by your affidavit
• The Government Gazette notice
• Proof both your trustee and the Master received your affidavit
• Proof your security (the R500) was paid to the registrar
• The Master’s report

The Master will report whether he has received your Trustee’s report.

The Outcome of the Court Application

If you’ve conducted yourself well throughout sequestration and your debt was caused by misfortune, your rehabilitation application will likely be approved.

What Happens After Rehabilitation?

Rehabilitation ends sequestration. Once you’re rehabilitated, you can take out credit again and are allowed to be director of a company. It also wipes out all the debts accrued during or before sequestration, allowing you to rebuild your credit report.

How Can Credit Rehab Help?

Credit Rehab’s attorneys can help you put a notice in the Government Gazette, submit your affidavit, collect the relevant documents, and make your court application. Our attorneys have years of experience acquiring rehabilitation orders and would be happy to help you reach financial freedom. To learn more, contact us today.