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The advantages of insolvency |
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 The negative consequences of debt:
Judgment taken by a Creditor stands for THIRTY YEARS or until such time as the debt, interest and costs have been settled in full. Assets will be attached to sell on an execution sale and the debtor remains liable for the balance of the debt after the sale for the full 30 years or until the debt has been settled in full. In the current economical circumstances low prices are fetched on execution sales and the banks generally do not put reserve prices on the property. This means that a debtor will not easily recover in his or her lifetime and a creditor can proceed to collect the debt over the next thirty years. You can never build up assets again in fear or creditors attaching them to satisfy there claims. You also will never be able to make debt again.
In these instances it would make more sense to sequestrate as a successful sequestration would get rid of debt, leaving a person free to start a new life as soon as possible.
To help yourself to make the decision, ask yourself the following questions:
DO I WANT TO MANAGE MY DEBT OR GET RID OF IT?
IF YOU WANT TO MANAGE IT, THE NEXT QUESTION IS: CAN YOU?
IF YOU CANT, THE ANSWER IS OBVIOUS: YOU HAVE TO GET RID OF IT AND THEREFORE YOU SHOULD CONSIDER SEQUESTRATION:
If you can’t pay back your debt or if it would burden you down for the next 5 or 7 or 10 years, then it is recommended that you re-look at your options. If were to save for the next 5 or 7 or 10 years, you will be in a very different position as opposed to paying your debt. The answer is simple: sequestration for individuals affords you exactly that opportunity: to get completely rid of your debt and start fresh on the same day that you decide to sequestrate.
LIQUIDATION: The Companies Act, the Trust Act and the Close Corporation Act determine that no business is allowed to continue doing business if their liabilites exceed their assets. Therefore, by law, one is supposed to liquidate a Company, Close Corp/Trust that are in financial difficulties to such an extent that it can’t pay creditors. Even if you realise that your business is not going to make it whilst it is still liquid, it is a good time to liquidate the business before you hit troubled waters. It is not the end of the world, if you wish to proceed to earn an income from your business, talk to us, there are solutions to this even if you liquidate or sequestrate. It is not the end of the road for you.
The advantages of SEQUESTRATION:
The moment you decide to sequestrate, you stop paying all debt. To pay any further debt at this stage would be throwing good money after bad. The monies that would have been paid towards debt can be used to pay the costs of application. Once the application costs have been paid, all the money that is earned is yours as there are no creditors to pay.
During the period of sequestration, it is possible to enter into debt, start a business or buy a house (*this statement is conditional – subject to the approval of the curator).
You can also make an offer to the curator to purchase back your property or assets if you are in a position to do so.
None of the current creditors can EVER demand payment or proceed with steps against you. If they do not get any monies from the proceeds of the assets sold, the debt MUST be written off by them
You can carry on with your life as per normal.
DISADVANTAGES
I can’t really think of any disadvantages. THE INSOLVENT ALWAYS WINS.
LIQUIDATION ADVANTAGES:
You don’t need to have assets in the business to liquidate
You don’t have to prove a minimum of 20c in the Rand to each creditor
You do not have to stop trading – talk to us there are solutions
You can purchase back assets from the curator if your offer is received and the chances are good that it will
DISADVANTAGES
I can’t think of any disadvantages. Number one by law it is a requirement that an insolvent business must liquidate and secondly, because of the requirement under number one, no assets are required.
A disadvantage could be that if you signed surety for any of the business entity’s debt (and you surely have) you will have to sequestrate as well. |
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Important information on insolvency
"I can’t really think of any disadvantages to sequestration. THE INSOLVENT ALWAYS WINS.
The only inconvenience is that it is expected of the insolvent to throw his assets, if he has any, in the “kitty” so that it can be sold to pay the creditors. That is the sacrifice that is required of the debtor. Given the circumstances, it is a small sacrifice to make as you can purchase back assets from the curator. Assets (except for immovable property) are valued by an estate valuer and it is valued at second hand prices."
Nanika Prinsloo, Attorney
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