Acts of Insolvency Providing the Creditor with Grounds to Apply for Sequestration of the Debtor

With the mounting debt of South Africans, more and more people are applying for voluntary sequestration, which is a legal process whereby, with the assistance of insolvency lawyers, an applicant requests the court to declare them bankrupt. With such, they are able to get rid of up to 80% of their debt. They only need to ensure that the sequestration will provide sufficient benefit to the creditors, will pay for the sequestration costs, and cover the curator fees.

However, as a creditor, you can initiate sequestration against a debtor with the assistance of insolvency lawyers if the debtor performs any of the acts below. These acts are by law considered acts of insolvency. As such, the debtor’s actions show that they are insolvent. To protect against the complete loss of the debt owed to your company, you can apply for compulsory sequestration of the debtor’s estate, in order to ensure that you get at least 20 cents out of the rand. This route is recommended if the debtor owes a substantial amount.

However, you also have another recourse to recover the debt. In this regard, we recommend speaking to our insolvency lawyers, who will be able to handle the debt collection, pursue attachment of the debtor’s assets, take other steps, such as tracking and tracing the debtor, if the debtor absconded, and ensuring that the debtor signs an agreement and does good on the agreement to pay off the debt.

The acts of insolvency as discussed earlier are:

  • Sends a letter from the debtor to the creditor in which the debtor offers to pay a lesser amount in order to settle the debt.
  • Sends a letter to the creditor in which the debtor admits the debt and the inability to pay it, but for instance, offers to pay off the debt through X amount instalments.
  • Debtor absconds – thus leaves the Republic of South Africa or his house with the intention not to pay the debt owed.
  • Selling or removing assets in an attempt to prevent the assets from being repossessed or attached for debt owed to a creditor.
  • Selling assets in order to pay one creditor and thus benefit the one creditor above other creditors.
  • Debtor publishes notice of intent to voluntary sequestrate in the Government Gazette, but fails to proceed with the sequestration.
  • Debtor advertises the sale of his/her business, but fails to pay the debt owed after the placement of the ad.
  • Debtor fails to pay the debt owed after judgment was awarded against the debtor, or where after judgment is taken, the sale of the attached assets does not provide sufficient funds to cover the debt.

Speak to our insolvency lawyers about debt collection, when you can apply for sequestration of a debtor, and which actions to take to ensure that you receive the required benefit.

Disclaimer: This article is for information purposes only and does not constitute legal advice. Call on our attorneys for legal advice, rather than relying on the information herein to make any decisions. The information is relevant to the date of publishing –  April 2018.