SEQUESTRATION REHABILITATION

HOW TO APPLY FOR SEQUESTRATION REHABILITATION IN SOUTH AFRICA

Rehabilitation is a legal process whereby an insolvent party applies to regain control over their financial
estate. It follows after sequestration. If the time period requirements, in addition to other requirements,
for rehabilitation have been met, the insolvent party’s status is changed from “sequestrated” to
“rehabilitated”. The “rehabilitated” status remains on the person’s ITC record for a period of five years,
whereafter it is automatically removed.

Time Period

According to the regulations of the Insolvency Act, an insolvent party is automatically rehabilitated after
a period of ten years. If the insolvent party wants to have their status changed from insolvent to solvent
before the 10-year period has elapsed, they must apply for sequestration rehabilitation. The general
timeframe for this is four years after the provisional sequestration date. There are instances in which the
insolvent party can apply earlier, and these are best discussed with our insolvency attorneys.

How to Apply

The attorneys obtain permission from the insolvent party’s curator or trustee for sequestration
rehabilitation. The attorneys draft the notice of intention to rehabilitate on behalf of the applicant. It is
published in the Government Gazette and a notice is presented to the Master of the High Court. The
insolvent party applies to the High Court, which grants a provisional order and sets a return date, at
which the final order is granted if no objections are received during the 1-month period. The attorneys
draft an affidavit, signed by the applicant, and present it to Court. The applicant does not have to appear
in Court.

Can the Curator Reject the Application?

The curator may refuse to give permission for application to be rehabilitated if the insolvent party did
not provide their cooperation during the period of sequestration. For example, the insolvent party may
have refused to leave the house after it was sold on auction, or may not have submitted all relevant
assets. The party may have entered into credit agreements after the sequestration order was finalised
without the permission of the curator.

Requirements to Apply

The general requirement is that of the time that has to elapse, which is usually four years. The applicant
must be able to prove that their financial situation has improved and thus be able to show that they can
financially support themselves. The debt owed must be paid in full. If, during the time of sequestration,
the applicant committed a criminal offense, the time period may be extended before rehabilitation can
be awarded. It is best to discuss the various requirements with our insolvency attorneys.
What Happens When the Insolvent Party Is Rehabilitated

All the debt from the sequestration is written off. Creditors cannot initiate further claims against the
party’s estate. The party regains full control over their financial estate and can once again be a director
of a company or hold certain positions that were precluded while they were under sequestration. The
“rehabilitated” status replaces the “sequestrated” status on their ITC record and the person can apply
for credit without obtaining permission from the curator. Keep in mind that all debts incurred after the
sequestration must be paid in full. The applicant must arrange for ITC clearance by forwarding a copy of
the rehabilitation order to the various credit bureaux in South Africa.

First Step in The Process

If you are under sequestration and want to apply for rehabilitation, speak to our attorneys, who will be
able to determine whether you meet the requirements. They will handle the process on your behalf and
explain the various options. You do not have to wait out the 10-year period. Even if the 4-year period
has not elapsed, you can still apply if you meet the relevant requirements.