Typically, a person can be sequestrated for a period of 10 years. The only other option is to apply to the Court for a rehabilitation order, which is generally only available after four years.
What exactly is sequestration in South Africa?
Sequestration in South Africa occurs after the Court issues an order declaring an individual bankrupt/insolvent. What does insolvent mean? According to South African law, bankruptcy is the denial of a person’s rights based on Court rulings due to his or her incapacity to pay debts acquired. This rejection implies that the individual’s legal competence has been weakened. Looking at sequestration in a different light, it occurs when an individual’s debt becomes too large to settle or difficult to manage, and the obligations surpass the assets that such a person possesses. The upshot of this is that if someone is expropriated, the Court will appoint a trustee to manage the insolvent’s wealth.
South Africa’s sequestration procedure
To sequestrate a person’s estate, an insolvency test must be performed. This test would assess the debtor’s liabilities in relation to the worth of his or her assets. When a proper assessment is made and it becomes clear that repaying the obligations is impossible, the individual becomes insolvent.
However, even if an individual meets the threshold for insolvency, if there is no order from the Court expropriating the individual, such an individual cannot be classified as insolvent for legal reasons. There are two requirements that must be met before the order may be granted: voluntary sequestration and coercive expropriation. The debtor applies to the Court freely in voluntary sequestration, whereas creditors petition to the Court to take the debtor’s wealth in coercive sequestration.
What happens when a person is sequestrated?
When an individual’s estate is sequestrated, there are restrictions on what the insolvent may do and what he or she cannot do, at least for as long as the expropriation is effective. For example, the types of contracts that the bankrupt can still participate in are limited. In particular, the insolvent will be unable to enter into any transaction involving the sale of insolvent estate property or the sale of transportable assets. Any deals involving the bankrupt would be in the creditors’ best interests.
