Insolvency

Basic information regarding Insolvency

Who is an insolvent?

An insolvent is a debtor whose estate (everything, including money, that a person owns) is under sequestration (has been placed under control until certain statutory provided time periods and/or prescribed conditions have been met).

If you are married in community of property and your spouse becomes insolvent, the Insolvency Act of 1936 considers you to be insolvent as well in light of the fact that there is only one joint estate.

When may an insolvent apply for rehabilitation?

Who can apply for rehabilitation?

  • The insolvent himself or herself.
  • The insolvent’s duly authorised agent, if the insolvent does not live in South Africa.
  • The widow or widower of an insolvent, if they were married in community of property.
  • The former spouse of an insolvent, if they were married in community of property.
  • The executors of the deceased estate of an insolvent.

How soon after having been sequestrated can an insolvent apply for rehabilitation?

1. At any time
If an offer of composition is made and accepted by three quarters of creditors in number and value, and after payment has been made or security given, or
If all creditors’ claims and sequestration costs are paid in full.
2. Six months
After six months of sequestration if no claims have been proven against the estate, provided the insolvent has not been convicted of certain offences and has not previously been sequestrated.
3. Twelve months
If the insolvent has not been convicted of certain offences and has not previously been sequestrated, he may apply for rehabilitation after 12 months have elapsed from the date of the Master’s confirmation of the first trustee’s account in the estate.
4. Three years
If the insolvent has not been convicted of certain offences, but has previously been sequestrated, he may not apply for rehabilitation until three years have elapsed from the date of the Master’s confirmation of the first trustee’s account in the estate.
5. Five years
If the insolvent has been convicted of certain offences, he may not apply for rehabilitation until five years have elapsed from the date of his conviction.
6. Ten years
After 10 years have expired, an insolvent is deemed to be rehabilitated unless a court orders otherwise upon the application of an interested person. Such an application must be made within the ten year period.

Please contact an attorney or your nearest Office of the Master for more information and assistance regarding the steps to follow to apply for rehabilitation.

For more specific details, please read sections 119 to 129 of the Insolvency Act 24 of 1936 as amended.

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