The effects of Sequestration

The effects of Sequestration

Although there are various options available to consumers who are struggling financially, sequestration is suited to cases where an individual’s liabilities exceed the value of their assets. By voluntarily surrending your estate to pay back creditors through sequestration, you will be able start the journey to becoming debt free. There are a few effects of sequestration to be aware of, as outlined below.

Once you have successfully undergone sequestration, you can apply to Court for a rehabilitation order, but only after 4 years. If you do not apply for this order, you will only be considered rehabilitated from sequestration after 10 years. The effects of sequestration do not need to impact you in the long term.

Understanding the effects that sequestration will have on you can make it easier to undergo the process, by preparing yourself from the get go. As the insolvent undergoing sequestration and not rehabilitated, there are certain restrictions to be aware of, which are mainly in place to protect your creditors.

Contracts

Employment agreements and agreements to take on work may be entered into by you as the insolvent. However, there are certain contracts that you will be prohibited from entering, which are outlined below:

• Contracts that add to your current debt. In some instances, the trustee may permit a vehicle loan if you can afford it without negatively impacting your existing creditors
•  Contracts that sell property of any kind forming part of your estate. This property will be sold by your assigned trustee in order to benefit your creditors
• Contracts that can potentially affect your estate in any way
• Selling of your movable assets will also be prohibited. All the assets forming part of your estate need to be sold to best benefit your creditors. You may have the opportunity to buy back the movable assets of your estate at a later time.

Contracts which are not prohibited

As the insolvent, you may earn and collect money for work done, whether this agreement for payment was entered into before or after the date of sequestration. This money earned will not form part of your insolvent estate to benefit your creditors. This benefit of sequestration allows you to continue earning a salary in order to care for yourself and your loved ones.

Any non-prohibited contract entered into by you as the insolvent after sequestration is considered binding and valid to all parties involved. In certain cases, a contract is still binding even though you may not collect the payments due to you and forming part of this contract – this depends on whether the Insolvency Act allows or does not allow it. Our Credit Rehab team of financial and legal professionals can assist you through every step of the sequestration process.

Legal proceedings during sequestration

It is important to note that, while undergoing sequestration, your insolvent status does not allow you to partake in or enter into any legal proceedings, as an effect of sequestration. This also means you cannot be sue or be sued and cannot initiate or continue a sequestration or liquidation application against someone else.

There are certain exceptions to the above. If you feel that your estate is not being governed properly and have concerns about the management thereof, you may take action against the curator assigned to you. Other exceptions include:

• Pension
• Child maintenance or divorce
• Recovery of overdue remuneration that was contributed after date of sequestration
• Claiming compensation for physical harm or defamation to you resulting from an edict

Your salary and employment

While under sequestration you will still be able to bring in an income and remain/pursue employment. Any income remains yours and does not benefit your creditors. Unless the curator appointed to you is grants permission for this, you as the insolvent are not permitted to work as a general trader or manufacturer.

Sequestration is a form of Debt Management that is available to South African consumers who are overwhelmed by debt. At Credit Rehab, we will assess your finances and budget in order to afford you the best possible debt management solution. Our comprehensive sequestration solutions are geared towards attaining your debt free status and in least stressful way possible, taking into account the above effects of sequestration.