What is Sequestration?
Sequestration occurs when an individual’s liabilities (debts) exceed their assets, meaning they are unable to pay their debts.
How to sequestrate?
Sequestration is a legal process initiated by a court order, declaring the individual insolvent and their estate sequestrated.
During sequestration?
A sequestration order protects the debtor from further creditor actions, such as lawsuits and repossessions.
Sequestration, which is the process of being declared insolvent or bankrupt with a court application, can be applied for in the following instances:
• A person’s liabilities (debt) exceeds their assets
• Judgement has been obtained on the assets
• There are shortfalls on assets after repossession
• Debt can’t be serviced monthly and a declaration has to be made to creditors that installments can’t be met (an act of insolvency)
Sequestration also entails the surrendering of the person’s estate, whereby the person applies to a court to be declared insolvent.
Sequestration is the process whereby creditors or a trustee take legal possession of a person’s assets until debts have been paid, or other claims, such as bankruptcy, have been met. Sequestration also entails the surrendering of the person’s estate, whereby the person applies to a court to be declared insolvent.
Debt sequestration and debt review are two different approaches to managing financial difficulties, each with its own advantages and disadvantages. However, for some individuals, debt sequestration may offer more significant benefits compared to debt review. Here are a few reasons why debt sequestration might be considered better:
Clear Path to Debt Relief
Debt sequestration, often referred to as bankruptcy in some jurisdictions, provides a clear and definitive path to debt relief. Once a person is declared insolvent, their debts are typically written off after the sequestration process is complete, offering a fresh financial start. In contrast, debt review involves restructuring your debt into a manageable payment plan, which can extend over several years without completely erasing the debt.
Immediate Legal Protection
When you apply for debt sequestration, you receive immediate legal protection from creditors. This means that creditors cannot harass you for payments or take legal action against you to recover debts. On the other hand, while debt review also offers some legal protection, it may not be as comprehensive or immediate as sequestration.
No Ongoing Payments
Debt sequestration often results in the liquidation of assets to repay creditors, but once this process is complete, the individual is typically discharged from any remaining debts. This can be a quicker resolution compared to debt review, where you may still need to make regular repayments for an extended period.
Reduction of Stress and Anxiety
The process of debt sequestration can significantly reduce the stress and anxiety associated with managing multiple debts. Knowing that there is an end in sight and that you will be free from the burden of debt after the sequestration process can provide psychological relief. Debt review, while helpful, can still be stressful as it requires ongoing financial discipline and commitment.
Potential for Faster Credit Recovery
While both debt sequestration and debt review will impact your credit score, sequestration can sometimes allow for faster recovery. Once you are discharged from sequestration, you can start rebuilding your credit history. In contrast, debt review requires a longer-term commitment, which might delay the rebuilding process.
Simplified Financial Management
Debt sequestration simplifies financial management by wiping the slate clean, allowing you to start fresh without the burden of previous debts. Debt review, meanwhile, often involves juggling multiple payments and maintaining a strict budget over an extended period.
While debt sequestration can offer significant advantages, it’s essential to consult with a financial advisor to determine the best course of action based on your unique financial situation.
Types of sequestration?
Voluntary Sequestration:
The individual voluntarily surrenders their estate to the Master of the High Court, who then appoints a trustee to manage the estate.
Compulsary Sequestration:
A creditor initiates the sequestration process, applying to the court to have the debtor’s estate sequestrated.