In South Africa, individuals grappling with overwhelming debt can turn to sequestration, a legal remedy designed to provide relief. Sequestration involves voluntarily surrendering one’s estate to the High Court, governed by the Insolvency Act 24 of 1936.
The process begins with an attorney, acting on behalf of the debtor, initiating an application for sequestration in the High Court. This application serves a crucial purpose: it allows debtors to write off a substantial portion of their debt, typically around 80%, providing a means to escape the clutches of uncontrollable debt.
Sequestration primarily assists debtors who have become insolvent, a situation where their financial liabilities surpass their income. A successful sequestration application grants the debtor the legal status of being “Insolvent.” Once this status is obtained, debtors are relieved of their obligation to continue making payments as outlined in the original creditor’s agreement. This agreement is brought to a conclusion once the creditors have received their fair share from the insolvent estate.
Sequestration thus offers a lifeline to individuals burdened by unmanageable debt in South Africa. It provides a legal framework for debt relief, helping debtors regain control of their financial futures and offering a fresh start on the road to financial stability.
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