Most of us have heard the term ‘bankruptcy’, but not many of us know what declaring bankruptcy
means and what the process entails. In short, people who declare bankruptcy are those individuals or entities that have more debt that they can realistically repay.
The process in South Africa involves:
- Applying to the High Court for voluntary sequestration – and explaining your financial situation. Sequestration is defined as the surrender of an individual’s estate (financial affairs) to the High Court under the governance of the Insolvency Act.
- Publicly stating, in a newspaper for example, that you are applying for voluntary sequestration.
- Informing your creditors of your financial situation.
The court will also only grant a bankruptcy application if you have sufficient assets to cover at least 15-20% of every Rand that you owe – not everyone who is in financial trouble can file for bankruptcy!
Why you shouldn’t declare bankruptcy
The process is expensive, anywhere between R15 000 – R30 000 in legal and administration fees and is complicated. Furthermore, it is not without consequences, your credit record will be damaged for 10 years! Only after a 10-year period will you be considered rehabilitated and be able to apply for credit – you will not be able to borrow money for 10 years!
If you are married in community of property, your partner will be held liable for your debt and the bankruptcy will also reflect on their record. You will also lose your assets and be unable to become a director of a company until the court declares you rehabilitated.
If you find yourself in trouble, it is always best to seek out advice and assistance on your situation. Instead of filing for bankruptcy, you should rather consider debt counselling, read more here
Tip: Another way of protecting yourself, is to make sure the information on your credit report is accurate. If it isn’t, you need to dispute it – find out how to dispute information on your credit report here. To get your credit report, visit www.mycreditcheck.co.za today!
Remember: An informed individual is a protected individual!