THE LAW

In terms of South African Insolvency Law a natural person, a trust a partnership, a deceased estate and a married couple's joint estate are sequestrated while a company or close corporation is liquidated.

In simplified terms, if a person's debt has become to great and is impossible to manage and such persons liabilities exceed his/her assets, the individual is insolvent (bankrupt).

In certain cases such a person can eliminate his debt and re-obtain a normal life free of debt. This is done by way of a procedure involving an application to court for the sequestration of such a person's estate.

Upon sequestration, a trustee is appointed by the master of the High Court, that is placed in control of the insolvent's estate. Creditors are then no longer able to pursue the insolvent directly.

There is a misconception that the insolvency procedure has been created to allow the people to incur debt and walk away. This is not the case, as is the trustees duty to guard creditor's interests and an application for the sequestration of a debtor's estate can be a very effective procedure to compel the debtor to pay. The insolvency procedure is therefore to the advantage of both insolvents and creditors alike.