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Sequestration • Is It An Option?

You may have heard of the term sequestration. You may be wondering how it works and if it might be right for you. Let’s take a closer look at the process and how it works.

In America it is called declaring Bankruptcy but here in South Africa we know it as sequestration or being declared insolvent.

The fancy legal term is ‘Capitus Diminutio’ and it means that the court says that your liabilities (what you owe) exceed their assets and the court has declared the debtors estate be sequestrated.

This is a long standing legal process of dealing with your debts when you cannot afford to repay your creditors everything they are demanding.

The idea is that a court says that you are not in a position to realistically pay off all that you owe. They then make use of your assets (the things you own) to pay off as much of the debt as possible. The court appoints someone to help with the process of selling off these assets and to make sure that the process runs smoothly.

You may remember Michael Scott from the (American) Office when he declared Bankruptcy. He later learned it was a bit more complicated than that.


The process begins when the debtor shows themselves to be insolvent (like by writing to a credit provider saying that they do not have the means to cover their debts).

The creditor then brings an application to court to have the debtor declared insolvent and to start the sequestration process .

If the process is a voluntary surrender or a’ friendly” sequestration the process is very similar.


Normally, it is an upset credit provider or credit providers who begin the sequestration process because the consumer is not paying their debts but has assets which could be sold to settle some of the debt.

There is also the situation where another more friendly person begins the sequestration process (as a sort of favour to the debtor knowing that the debtor want s to sequestrate).

It might be a friend who really is owed a debt. The debtor might send a letter to their friend saying they cannot pay and are actually insolvent. The friend could then begin the legal process calling for sequestration.

If everything is above board and the debt owed to this person is real and the process will benefit the creditors then the courts will allow the process to begin.


An advert is published in the Government Gazette and newspaper like Die Burger.

An ability statement is made up and commissioned and handed in to the Master of the High Court (or local magistrate). A registered letter is sent to everyone who is owed money (the creditors) and SARS is notified (since they get first go at your money if they are owed anything). After appearing in court with an attorney, a Curator is appointed by the court to look after things. The Curator will now
handle all financial matters on behalf of the debtor and make sure the sequestration runs smoothly.

Assets are evaluated and the value worked out. These values are used to ensure you will cover the minimums asked by the courts . The assets are eventually sold off to settle up as much of the debt as possible. In many cases family and friends of the person declared insolvent buy some of the assets or perhaps even the person themselves buys certain things back. You may wonder where an insolvent person gets money from. Well, they may end up staying in their home while it is being sold. During the time it takes to sell off and transfer the property they might not be paying off their bond .

This means they have some available funds to use for things like a deposit at a new rental or to buy some assets back . The person may also be receiving a regular salary enabling them to now use funds that were previously used to pay off debt (now included in the
sequestration) each month.


Why would someone be happy to be sequestrated? Why would they even set in motion a friendly sequestration process if they will lose all their assets?

The main benefit to the debtor is that once sequestrated their debts are gone. The debts belonging to the person’s sequestrated estate are now settled by the Curator and the consumer is no longer liable for them.

This is a huge stress reliever.

The person, who now no longer has any debts, can later be rehabilitated and if they want enter the credit market at a future time.


The main idea behind a sequestration is to get as much money back to the credit providers as is realistically possible in a short time period.

This is why the courts require a minimum percentage of the debt to realistically be paid off. If there will not be enough money for the credit providers then the courts will refuse the sequestration.

In some parts of the world there are different rules about this and even in South Africa there have been discussions about what is known as a poor man’s sequestration option. At present, however, government feels that the court summons and judgment process as well as the administration and debt review processes provide enough relief options for those who do not qualify for sequestration . These other options all help credit providers get paid back over time.


Normally, the assets that you have are sold off to pay back the credit providers (with the credit providers who are currently giving credit for a particular asset getting their money first) but what if you do not have any assets with any value?

Though this is rather uncommon, it is possible to enter sequestration and pay off a portion of the debt owed with cash.

This could happen, for example, where a family member offers to provide the needed funds and they cover the required minimums which the court feels will be fair to the credit providers.


By law once you are sequestrated you need to wait 10 years to begin using credit again. This is designed to protect credit providers from consumers abusing the process and to give consumers time to get back on their feet. After 10 years there is no need to go back to court to be declared solvent. It just sort of happens.

It is, however , possible to go back to a court sooner (eg. after only 4 years) and ask the court to look at your financial situation and declare that you are no longer insolvent. This then allows you to, potentially; get access to credit once more. Here is an image of what will show on your credit bureau record when you have been sequestrated

Anna-Rita Celliers of Splendi says: A sequestration order remains on your credit profile for five years, or until a rehabilitation order is granted. The rehabilitation order will then appear on the credit profile for a further 5 years provide the needed funds and they cover the required minimums which the court feels will be fair to the credit providers.


If you have a car financed through the bank, which you still owe money on, that bank will take the car back and sell if off on auction to recover some of their money.

Sometimes. if the car payments are up to date. the bank may let you keep on paying the instalments each month and not take the car back. This is totally up to them.

If you have a totally paid up car that is in your name (and not sold to a family member or someone else before the time) then the car will be sold off as part of your estate.


Some consumers who are in debt distress have started the sequestration process and gone to court to be declared insolvent only to be turned down by the courts. Why?

In those cases, it was because the court figured out that the consumer could rather enter debt review and pay off what they owe over a number of years. In those cases, this was because the courts also worked out that the credit providers would get all their money back instead of just a portion of the debt. This does not happen every time but the math has to be clearly to the benefit of the credit providers and the courts like to see that around a fifth(+- 20Cents out of each Rand owed) will be paid back to the credit providers.

Also, it is important to remember that the process itself costs money and you will have to pay attorneys for their services. These fees vary anywhere from R20 000 to R50 000 according to Attorney Wessel Symington of Steyn Coetzee Attorneys. This is why it is always a good idea to talk to an attorney about the process and see if they feel that it is the right option for you. In many cases qualified Debt Counsellors, who know the process, might also be able to give advice about whether sequestration would be of more benefit to you than debt review.