Frequently Asked Questions
What does voluntary Surrender of estate mean?
Voluntary surrender of estate entails relinquishing control of your financial affairs to the Master of the High Court under the Insolvency Act 24 of 1936. Initiated in the South African High Court by an attorney and advocate acting on behalf of the debtor, this process offers individuals burdened by uncontrollable debt the chance to potentially have up to 80% of their debts written off. Voluntary Surrender of Estate grants them the legal status of Insolvent, releasing them from further creditor obligations. Once creditors receive their rightful benefits from the insolvent estate, their claims are settled, and the account legally expunged from the consumers records.
What does the process entail?
- Assessment of the Client’s Situation:
- The Insolvency Practitioner/ facilitator evaluates if the client is truly insolvent or if other debt remedies under the National Credit Act are more suitable. This is done through completion of an application form, providing necessary information for accurate advice.
- Decision to Proceed:
- If the client decides to proceed they are required to make a monthly repayment of application fees which include fees to the application as well as a percentage contribution amount which will be used to the benefit of the creditors, a positive payment history is established whereafter the application is processed to the attorney, the attorney publishes the intention in the Government Gazette and secures a court date.
- Upon publication, the client is protected under the Insolvency Act, barring further payments to creditors (except garnishee orders).
- Preparation of Court Documents:
- The attorney drafts a statement of the debtor’s affairs and other necessary documents for the High Court Application.
- Information includes a list of creditors and their outstanding amounts, along with potential benefits to creditors if the application is granted.
- Court Appearance:
- An Advocate presents the case in High Court on behalf of the client.
- The client does not need to appear in court personally.
- The attorney notifies the client of the court’s decision post-hearing.
- Post-Application Approval:
- Upon approval, the attorney provides a court order once processed by the Court typist.
- The Master of the High Court appoints a curator to handle the financial affairs of the Insolvent Estate.
- Handling of Funds:
- The client, usually through the attorney, provides funds to the curator to pay creditors’ benefits.
- Negotiation options include spreading payments over 18 to 24 months or settling the amount in full.
- If neither option is viable, assets may be auctioned to recover debts.
- Distribution of Benefits:
- The curator, following Insolvency Act regulations, distributes benefits to creditors as outlined in the sequestration application.
- Settlement of Claims:
- Once all creditors’ claims are settled, the curator provides the insolvent with a document confirming satisfactory conclusion of the estate affairs.
- Rehabilitation Process:
- With the document from the curator, the insolvent can apply for rehabilitation.
- The entire process typically takes up to 48 months but can vary based on individual circumstances, sometimes concluding in less than 24 months.
I own a property how does it influence the application?
If you’re considering voluntary surrender of estate but own property, there are important considerations to weigh. Unfortunately, you won’t be able to retain your property through the process. However, many clients utilize the accumulated equity in their property to cover sequestration costs and creditors’ benefits. This can alleviate additional financial burdens during a challenging time.
If your property is already scheduled for auction by the bond holder, declaring your intention to voluntary surrender your estate can halt the auction process. An advertisement in the media can stop the auction, particularly if there’s substantial equity in the property that can benefit the insolvent estate.
It’s essential to note that whether the property is sold conventionally or through auction, you will ultimately lose it. Until a curator is appointed, you can continue to reside in the property at no cost, which can take several months. However, abandoning the property during this period isn’t advisable, as properties tend to sell more easily when occupied.
How long will I be able to stay in my house if it is included under the application?
As the registered owner you will be able to stay in the property until such time as the appointed trustee gives instruction for you to vacate the property.
Note however that the municipal accounts remain your responsibility to keep up to date. In terms of the process of the voluntary surrender of estate you will have roughly 9 months but this could be negotiated within reason.
I own a vehicle, how does this influence the application?
What happens to your vehicle depends on whether it’s under a finance agreement or fully paid for.
For vehicles under finance agreements, typically under the hire purchase concept, the financial institution holds the title document until full payment is received, preventing sale to a third party. There are two scenarios:
- Excluding the Vehicle: If the vehicle is repossessed by the bank before the sequestration application or returned by the client prior to the publication of the intention in the media, it’s excluded from the insolvent estate. But should a short fall be applicable the shortfall will be included under the list of creditors.
- Including the Vehicle: If the vehicle is part of the Insolvent Estate and listed as a creditor, it’s usually beneficial to include it in sequestration, especially if there’s equity. The curator may return the vehicle to the bank or sell it to capitalize on the equity. The insolvent retains possession until a curator is appointed.
Regardless of the chosen route, be prepared to make alternative mobility arrangements, as the financed vehicle will be lost in insolvency.
However, for vehicles paid in full, they become assets in the insolvent estate. The insolvent has the opportunity to repurchase all fully paid assets from the curator, we however advise to exclude it by completing a change of ownership.
The bank wants to repossess my vehicle what should I do?
Banks employ collection agents who often resort to intimidation tactics to reclaim vehicles or persuade individuals to voluntarily surrender them. However, legally, only the sheriff of the court is entitled to collect a vehicle, and only with a court order. If no such order is obtained and the bank lacks permission from the appointed trustee, consumers are advised not to surrender the vehicle.
Can I cancel my insurance on the vehicle which is included under the voluntary surrender application?
Any vehicle included under the application must remain insured at all times, whilst it is in your possession. This is to limit your risk.
I have applied for voluntary surrender of estate what happens to my debt review?
The voluntary surrender application, upon its approval, supersedes the debt review process. Consequently, the status conferred by debt review is nullified by the granting of the High Court order.
Upon receipt of the application Notice of the voluntary surrender application is made to the debt counsellor of record and instruction is given that all payments to any creditor is to be stopped.
We suggest that during the process of the voluntary surrender of estate the debt counsellor suspend their service and that all communication from creditors be sent to our offices.
What do I do if a creditor calls, sms or attempts to communicate with me?
Upon commencement of your Voluntary surrender application process, you will no longer be required to manage communications from your creditors. Instead, you can direct them to contact us as your designated facilitator and Attorney of Record.
Why are my creditors still contacting me and what to do?
Until the final granting of the voluntary surrender court order, creditors retain a legal right to pursue collection of funds on overdue accounts. However, it is imperative to note the provisions outlined in section 129 of the Insolvency Act, which prohibit entering into repayment agreements that prioritize one creditor over another. Additionally, any legal enforcement actions initiated by a creditor will be superseded by the High Court application for voluntary surrender of estate.
When do the creditors receive payment?
Upon the grant of the court order, it becomes the obligation of the Master of the Court to appoint a trustee entrusted with the responsibility of administering the winding up of the estate. Subsequently, the trustee will convene meetings with the creditors, affording them the opportunity to lodge claims against the estate. Upon substantiation of these claims, creditors receive distributions in accordance with their respective statuses.
Will I lose my furniture?
According to insolvency law, specific assets must be included in your trustee’s attachment process. Nevertheless, we will negotiate with your trustee to exclude your furniture from the insolvent estate. You are afforded the opportunity to provide a cash contribution to the estate, effectively repurchasing any movable assets.
Are there any accounts which may not be included under the applications creditor list?
Kindly note that any service agreement or statutory accounts are excluded from the application, this includes the following:
- Current school fees
- Fines
- Tv license
- Current Municipal and utility accounts
- Certain furniture purchase agreements (Lewis, Bears)
- Pension backed Loans
I received a summons/ judgement what do I do?
Kindly bring all formal documentation received from creditors to our attention so that we may address it in time with the representing attorneys. We require the first 5 pages of any summons/ judgement received.
It is imperative to remember that you cannot go to jail for debt but that certain summonses must be complied with (Summons to appear sec 65 A) . To enable us to guide you we need to be informed.
Can I open a new bank account?
It is advised that to prevent money grabbing from the creditors that you open a new savings bank account with a bank you are not indebted to.
With the voluntary surrender application any Cheque -, Current account may be frozen by the creditor or the appointed trustee at any time of the process.
Can I open a company if I am insolvent?
As an insolvent you may not be the director of a registered company but you are allowed to have a business as a sole proprietor.
Taxes and insolvency
How does this influence my tax procedures
The tax status of the insolvent person is terminated and substituted with a new entity that is the insolvent estate, from the date of sequestration. The individual also receives a new taxpayer identity from the date of sequestration.
Upon receipt of the final court order the consumer is advised to take the order to their nearest SARS office, to register the insolvency and provide the consumer with a new income tax number. In some instances, the SARS representative may require additional information. This request can be referred to our offices so that we might assist in providing the information if it is available.
Who is responsible for the taxes?
Three distinct taxpayers bear tax liability:
- The insolvent individual for the period preceding insolvency (up to the day preceding sequestration);
- The insolvent estate, established as a new entity from the sequestration date for each assessment year until estate finalization;
- The insolvent individual for the period during and after sequestration. Despite being identified as separate taxpayers with distinct tax reference numbers, the pre- and post-sequestration insolvent individual remains the same natural person
Can I still rent?
As a sequestrated insolvent some of your legal rights are suspended with the application: for instance you may not enter into any new agreement/ contracts with any other entity without the permission of the appointed trustee when you are an insolvent, Your constitutional right to housing supersedes this rule and a simple letter can be provided by our offices to ensure that you application is considered when applying for a rental property.
Will my salary be influences by the voluntary surrender?
Following sequestration, creditors are forbidden from garnishing your salary, and any existing attachment or garnishee orders will be immediately nullified.
Will my assurance and retirement policies be attached on the assets of the application?
Your retirement annuity remains safeguarded from inclusion in your insolvent estate, as do any funds disbursed to you in accordance with a personal injury claim. However, policies ceded to creditors become assets of said creditors. (Pension backed Loans)
Can I take out a loan whilst in the process of the voluntary surrender of estate application?
An individual in insolvency is prohibited from acquiring credit, deemed ineligible for specific official roles, prevented from entering certain contracts, and restricted from pursuing certain occupations.
What are my responsibilities with regards to the insolvent estate?
Your responsibility towards the estate is to maintain the agreed repayment for the term as advised, you are required to provide trueful and accurate information and provide your co-operation during the process and finalization of the estate.
When is a trustee appointed?
Under sec 18 of the insolvency act the Master of the court may appoint a provisional trustee in accordance to policies determined by the Minister, within 6 months after the estate has been sequestrated is the average appointment term, this however varies from case to case.
What does the trustee do?
The trustee’s primary duties involve administering, liquidating, and distributing the bankruptcy estate. Additionally, the trustee is responsible for assessing, adjudicating, and approving creditors’ claims.
What can I expect from the trustee?
The trustee will interview the insolvent, by way of a form which is to be completed to provide current income and expenditure information, and to verify that the information provided on the court application is indeed correct.
When can I rehabilitate?
Under the insolvency act there are 5 sub sections under which a insolvent can rehabilitate after a voluntary surrender has been granted.
Due to effluxion of time: 10 years has lapsed since the granting of the voluntary surrender order.
- 12 months after proven claims against the estate has been settled
- If you have previously been sequestrated you will only be allowed to rehabilitate after four years provided no offences were committed.
- 6 months after the voluntary surrender has been granted provided no claims have been proven and the master provides consent.
- If full payment of the claims are made and the L&D has been confirmed by the master of the court and the master has provided permission for the rehabilitation.
- Due to effluxion of time: 10 years has lapsed since the granting of the voluntary surrender order.
What is an application for rehabilitation?
To successfully undergo rehabilitation, you must demonstrate to the court that you are financially responsible and suitable as an individual. This entails showing that you handle your finances responsibly. Additionally, you must provide evidence of meeting all legal obligations and, if relevant, that any required contributions have been paid.
An application is made to court to ask the court to grant a rehabilitation at the courts discretion.
What does Contribution mean?
As you settle your estate, it’s possible that there may not be sufficient funds to cover the administrative expenses. In the event of a shortfall in funds for the overall administration of your insolvent estate, each creditor with a proven claim will be responsible for contributing a proportional amount towards these costs. Any administrative expenses already covered on your behalf will need to be repaid by you upon filing your application for rehabilitation, we make a predetermination of these cost and include it under the total application due by you.
What happens to the surplus after the creditors have received their benefits?
The cost of the sequestration is paid after the preferred and then the unsecured creditors have received their benefits. If there is still a surplus after the sequestration costs have been covered, the surplus is returned to you when you apply for rehabilitation.
Can you still acquire assets after the sequestration?
Yes, provided the assets do not form part of the surrendered estate and fall into categories, such as pension, personal injury claim, remuneration, specific insurance benefits, or defamation claim benefits.
Assets such as vehicles require the permission of the trustee within reason should a rehabilitation not be granted as yet.
Assets may be acquired after rehabilitation without the permission of the trustee.
What happens to your property outside the republic of South Africa when you are declared insolvent?
Only properties situated within South Africa and contingent interests in South African-based properties are encompassed within the insolvent estate. Consequently, any immovable properties located outside the Republic of South Africa are exempt. However, if you are domiciled within the court’s jurisdictional area, you forfeit your movable property irrespective of its location.
I have been rehabilitated but cannot obtain any new credit why is that?
Banks that incurred losses from your sequestration typically wouldn’t offer assistance in the future. We recommend considering banking with a different institution. However, whether a bank chooses to provide assistance is entirely at its discretion.
What happens after I have been rehabilitated?
Rehabilitation results in the discharge of the insolvent from all debts. The language in section 129(1)(b) indicates an intention for the pre-sequestration debts to be fully extinguished, granting the debtor a comprehensive discharge. Upon granting of the court order you as the insolvent are required to submit the information to the credit bureau for the updating of your records.
WHAT WILL HAPPEN TO MY CELLPHONE CONTRACT?
If you can afford to maintain your monthly cell phone bill, do so.
