The sequestration process involves a Court Application. The Applicant will be either yourself, in the event of voluntary surrender, or one of your creditors (either a friendly or aggressive creditor).
The applications are similar and have the same result, however there are different requirements for each.
Voluntary surrender refers to the process whereby a natural person can make an application to place him/herself under an order for sequestration.
A person is insolvent if their liabilities exceed their assets. In such a case they can apply for voluntary surrender of their estate. Anybody can apply for voluntary surrender at any stage once they become insolvent, even if they have been or are for example under debt counselling.
A person who wants to voluntarily surrender to sequestration will sign an Affidavit explaining why they claim they are insolvent. This will be drafted by the Attorneys who bring the application on behalf of the Applicant. As soon as the Affidavit is signed, the application will be issued at Court and a Court date is assigned. The Applicant does not have to appear in Court as the Advocate appears on his/her behalf.
If the Court grants a provisional order on the first Court date, the matter will be postponed for approximately one month. During that month notice will be given to all creditors, and if on the return date no-one has opposed the application, the order will be finalised and the Applicant’s estate will be sequestrated.
Applications are also made by way of a Court application; however, in this case the Applicant will be a creditor of the debtor. If it is a creditor with whom the debtor does not have a good relationship, we refer to it as an “aggressive” sequestration (examples of such are usually the banks).
However, the banks seldom bring sequestration applications against the average debtor as it is much cheaper and easier for them to follow the collection procedures: whereby they attach a property and sell it and/or claim your salary.
If it is a creditor with whom the debtor has a good relationship, we refer to it as a “friendly” sequestration (examples of such are a family member or a friend to whom you owe money).
Aggressive (“unfriendly”) sequestration
Where an unfriendly creditor brings a sequestration application against a debtor, we refer to it as an aggressive sequestration. It is also a forced sequestration as opposed to voluntary surrender.
The creditor who brings the application must have established a claim against the debtor; in other words, the debtor must indeed owe the creditor money. A second requirement is that there must also be a benefit to creditors. Thirdly, the debtor must have committed an act of insolvency.
If a creditor brings an aggressive application against a debtor, the debtor can oppose the application if they are not insolvent or if there is another reason why the order should not be granted.
Process for “unfriendly” and “friendly” sequestrations
The process for both these applications is the same and it is only the Applicant that differs.
As with voluntary surrender, an Affidavit will be signed by the creditor explaining why he avows that the debtor owes him money. He will attach proof thereof (usually in the form of a contract/statement) and also proof that the debtor has committed an act of insolvency (where the debtor has written a letter to say that he cannot pay the debt). In both instances the Applicant must prove that there will be a benefit to the creditors if the debtor is sequestrated.
Once the Affidavit has been signed, the necessary documentation will be drafted, issued at Court and a Court date assigned. The documents will be served on the debtor, employees of the debtor, Master of the High Court and the South African Revenue Services by the Sheriff. The provisional order should be sent to all creditors who are owed more than R5 000.00 by way of registered post. If the application is not opposed, a final order will be made for the sequestration of the debtor/Applicant.
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice.