Best Debt Relief Options: SEQUESTRATION

Sequestration in South Africa - Aka Surrender of your estate, falls under the more general terms of Insolvency and Bankruptcy.

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Sequestration is a process determined by regulations in The Insolvency Act 24 of 1936. Sequestration is the oldest form of debt relief worldwide and the only effective solution in South Africa that offers you a discharge of debt or write off of debt.

Little History:

Written by Rohan Lamprecht
Additional comments by Eugene Prinsloo
Bankruptcy can be traced back through the centuries to Hebrew Scriptures that refer to Moses' Laws that prescribed one "Holy Year" or "Jubilee Year" that should take place every 50 years, when all debts are eliminated among Jews and all debt-slaves are freed, due to the heavenly command. The law of debt forgiveness can be found in the Old Testament of the Bible:

The formal concept of Bankruptcy stemmed from the Roman Empire. The actual word ‘Bankruptcy’ was derived from the ancient Latin term bancus ruptus which means ‘broken bench’, as it was common practice amongst the first bankers of that time to use a bench in public places such as markets to do business, count their money and to write bills of exchange on. Whenever a banker failed, he broke his bench in order to inform the public that his “bank” was no longer in business, as he was bankrupt.
Pre-Union legislation relating to insolvency law in South Africa were regulated by various ordinances during the 1800. 

In 1916 the Parliament of the Union of South Africa repealed the existing statute law of insolvency in the various provinces and substituted a uniform law of insolvency which was implemented throughout the then Union of South Africa. The Insolvency Act, Act 32 of was repealed on the 1st of July 1936 by the commencement of the current Insolvency Act, Act 24 of 1936. 

Although it has been frequently been amended over the years since its implementation, it has remained largely unchanged. The most comprehensive amendments were brought about by the following Insolvency Amendment Acts: 16 of 1943, 99 of 1965 and 101 of 1983.
In 1987 the South African Law Reform Commission lodged an investigation into all aspects of insolvency law under their mandate to review the Law of Insolvency. The Insolvency Amendment Act 122 of 1993 and 32 of 1995 were passed, before the South African Law Commission Report Project 63, as it was known, eventually led to a draft Bill in 2000 and the implementation of Insolvency Amendment Act 33 of 2002 and subsequent Insolvency Second Amendment Act 69 of 2002. Although the aforementioned draft Bill also adopted a fresh start approach for bona fide debtors by proposed certain new sections the various acts in order to facilitate pre-bankruptcy compromises, it was eventually resolved that prevention is better than cure.

In this regard it was submitted that the solution to over-indebtedness did not only lie in reform of the insolvency legislation, but in the reform of consumer protection legislation as well. This realization eventually led to the implementation of the new National Credit Act, Act 34 of 2005 with the aim to address and prevent over-indebtedness. The NCA as it is commonly referred to, offers mechanisms for debt payment restructuring by affording an over-indebted consumer the opportunity to apply for debt-arrangement.

Although the aim was to assist the over-indebted consumer, the NCA also opened up the proverbial “Pandora’s box” with regards to unscrupulous Debt Counsellors. The main problem for the consumer seems to be that the relief offered by the NCA boils down to an extension of the debt repayment timetable, without addressing the effect of interest over the extended period.
This means that you might well pay much more for debt that you normally would and debt counselling offers no reduction in debt.

Thus when all is said and done, the informed consumer that seeks a truly fresh start and clean slate from over-indebtedness is ultimately still left with only one recourse - filing for voluntary bankruptcy or sequestration in terms of the Insolvency Act, Act 24 of 1936.

The Purpose of Sequestration:

The purpose of Sequestration in South Africa is mainly to offer creditors a fair distribution of the insolvent debtor's estate and consequently this offers the debtor a fresh financial start.

What does this mean for you as a debtor?

It means that the Insolvency Act in the form of a sequestration order offers the only real debt relief. All other debt relief measures fall short of offering a write off of debt as sequestration does.

(Opinion) It is my belief that we had perfectly sufficient debt relief measures and laws before The National Credit Act. I believe that the National Credit Act was a response to a call from Government and large credit providers to protect the credit industry from the effects of the recession. Lawmakers missed a real opportunity where they could have made a real difference in the lives of many South Africans that suffer from over-indebtedness and that are victims of reckless credit or lending practices.