A sequestration order in South Africa is a legal process that involves the surrender of a natural person’s estate. This occurs when an individual applies to the court to be declared insolvent, and it operates under the provisions of the Insolvency Act 24 of 1936, often referred to as “the Act.”
Insolvency, as defined by the Corporate Finance Institute in 2020, signifies a state of financial distress where an individual is incapable of settling their outstanding debts. Importantly, being unable to meet outstanding debt obligations alone does not lead to insolvency. True insolvency occurs when a person cannot cover their debts even after all their assets have been liquidated and sold.
Obtaining a sequestration order can happen in two ways:
Voluntary Application: An individual voluntarily seeks the sequestration order, recognising their insolvency and choosing this path.
Creditor Application: Alternatively, creditors can apply for a sequestration order when the individual’s financial situation necessitates it.
Understanding the sequestration order process is crucial for those navigating financial challenges in South Africa, as it impacts an individual’s financial status and debt management.
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