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Sequestration and Administration

• We often receive enquiries from clients who want to declare themselves “bankrupt”.

• Just if you don’t know – a private person sequestrates, while a legal person (company, CC, trust) liquidates = declare bankruptcy.

• Sequestration definitely has a place, if your financial situation is so bad, that your debt counsellor is no longer in a position to help you, and it is clear you are going to lose your assets.

• You MUST sequestrate if you will in any case lose your possessions, and will still end up with shortfalls, which you will have to pay back.

• You need money to sequestrate – cash or assets. Very few people with financial problems can sequestrate, without owning a property.

In most cases, there will be enough equity in a property, to pay the creditors what is prescribed. At the moment it is about 20c in every rand you own creditors.

If you do not own a property, you will need enough cash to pay 20c/R.

• There are administration cost (for the attorney, ads, etc), which usually must be paid in cash up front. It can be from R6 000 to R20 000, depending on which attorney you use.

The costs are for many people the downfall, but you will stop paying your debt, the moment you decide you are going to sequestrate. You will also not pay your bond and will be able to stay on in the house, without payment, for a while. You can therefore use the money from your debt repayments, to pay the attorney, even if it is over three months.

• You will obviously lose your possessions. You can however buy back your furniture from the curator, at minimal cash amount (can also use the debt repayments for this). It will then not go on auction. You can however find out about all this from our attorney.

If you lose your vehicle, there is an option to rent a vehicle, which will become your property later.

• You will be able to rehabilitate after 4 years, after sequestration (remember, under debt counselling it can take up to 5 years and more, before we can issue a clearance certificate – but again, you will not lose any assets).

If you therefore do not qualify for debt counselling, or your legal process is so far, that it cannot be stopped any longer, speak to your debt counsellor immediately, to rather sequestrate.

In some cases you can still sequestrate after a sale in execution, but you will have to apply immediately and there is no guarantee that it will be granted.

• Property, vehicles and other possessions sell for next to nothing at a Sheriff’s auction. In almost all cases, clients are left with thousands of rands in shortfalls, which they will still have to pay back to the creditors. Unfortunately it is not over and done after an auction – this is part of a judgment, which will stand against you for the next 30 years.

• If you know the proceeds of the sale of your assets will not be enough to settle all your outstanding debt, so your debt can be paid off in full, rather sequestrate, than to pay for something you do not own any longer.

• ADMINISTRATION was used before debt counselling came into effect, to collect debt, but consumers can still apply for administration. This will phase out in the next few years and only debt counselling will be available.

• You can still apply for Administration, but your total debt cannot exceed R50 000 and you cannot include a home loan or vehicle finance.

• In some cases you can include accounts under administration with your debt counselling, but you will not have the benefits you receive under debt counselling.

Below are some differences between debt counselling and administration:

DEBT COUNSELLING ORDER
ADMINISTRATION ORDER
Applicable to all credit agreements, with no monetary limit for the amount you can include judgments and non-credit agreements, are not included, but many of these we can include, with negotiations.
Property and vehicles can be included.
Applicable to judgments, unsecured credit agreements and non-credit agreements, to the maximum of R50 000.
No property or vehicles can be included.
Consumer cannot apply for more credit, except a consolidation loan. Consumer cannot get further credit, without declaring it to the creditor, or it will be a criminal offence.
Creditors receive monthly payments. Creditors receive quarterly payments (every 3 months).
A PDA (registered payment distribution agency) does distributions An Administrator or attorney does distributions.
Debt counsellors and PDAs must register and are regulated by the NCR. Administrators are not regulated
A stop order or debit order is arrange to pay the payment distribution agency, so your employer do not need to know you are under debt counselling An emolument attachment order (garnish against your salary) will be issued
The debt counsellor will issue a clearance certificate and clear your name at all credit bureaus. A Section 74 U certificate is issued, once your debt is paid off and the court must consent that the information be removed by the credit bureaus.
NDMA (National Debt Mediation Association) Rules are applicable and you will pay off your debt in maximum 60 months (longer for vehicles and property).
Interest can be reduces to 0%, when applicable, and you will only have to pay back capital
No limit to payment period and re-payments can stretch over long periods.
Once off application fee, which will be the first restructuring payment, to a prescribed maximum.
5% aftercare fee.
Prescribed application fee.
12.5% monthly.

 




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