Common misperceptions about sequestration


  1. It is not possible without assets:

The sequestration process is designed for the benefit of the creditors to ensure they at least get something meaningful back for the credit they extended. The courts have ruled that the minimum threshold should be that the realisation of an insolvent’s assets should equal at least 20 percent of the debt due, so creditors may receive at least 20 cents for each Rand of debt owed to them. This is known as the dividend from the proceeds of realisation of the estate’s assets.

The dividend can be paid either by the sale of any movable or immovable assets, or it may be paid in cash, either once off or by instalment over several months. Thus, if the insolvent does not have assets, but earns a regular proven income, the sequestration can be done on the basis that the insolvent pays the dividend in cash, either as a lump sum, or by way of monthly payment.

  1. Every consumer pays the same amount:

Every consumer has their own unique debt profile, and as such, every consumer is likely to have a unique outstanding balance. The amount a consumer must repay to their creditors is a minimum of 20 cents in the Rand and as it is calculated on the consumer’s total debt, this amount shall vary amongst consumers.

  1. I can use an agent and don’t need an attorney:

Section 3 of the Insolvency Act of 1936 states that an insolvent debtor or his agent or a person entrusted with the administration of the estate of a deceased insolvent debtor or of an insolvent debtor who is incapable of managing his own affairs, may petition the court for the acceptance of the surrender of the debtor’s estate for the benefit of his creditors.

However, the application for sequestration is one that may only be made in the High Court. Unless, the consumer represents himself at court, he must appoint an attorney with right of appearance in the High Court, or the attorney must appoint an advocate, to represent the consumer in court. There are several service providers, who offer sequestration services for consumers. If the service provider is not an attorney, then he or she must appoint an attorney, who may in turn appoint an advocate, to appear before court.

  1. I can be sequestrated in any court:

As the application for sequestration affects a person’s legal status, the application for sequestration may only be brought in the High Court with relevant jurisdiction, i.e. where the consumer resides.

Section 149 of the Insolvency Act – Jurisdiction of the court.

(1)  The court shall have jurisdiction under this Act over every debtor and in regard to the estate of every debtor who

(a) on the date on which a petition for the acceptance of the surrender or for the sequestration of his estate is lodged with the registrar of the court, is domiciled or owns or is entitled to property situate within the jurisdiction of the court; or

(b) at any time within twelve months immediately preceding the lodging of the petition ordinarily resided or carried on business within the jurisdiction of the court.