Rehabilitation of an insolvent

Sponsored Content

BUSINESS NEWS - For an insolvent to bring an end to the sequestration proceedings he/she must first be rehabilitated. After rehabilitation the insolvent will be able to start fresh with his/her pre-sequestration debts discharged.

The rehabilitation process looks different from one insolvent person to another depending on the claims that were proved against, the proceeds that were available to creditors, whether any offences were committed etc.

As a starting point an insolvent will automatically be rehabilitated after ten years have expired determined from the date of sequestration. Alternatively, an insolvent can be rehabilitated earlier by means of a court order.

The Insolvency Act provides various conditions and different time limits before the insolvent may apply for rehabilitation.

The most common conditions are explained below:

Composition of not less than fifty Cents in the Rand:
The Master will provide a certificate confirming that creditors have accepted an offer of composition in which payment has been made, or security has been given for payment of not less than fifty cents in the rand for every concurrent claim proved or to be proved against the estate.
After the lapse of a period of four years:
Usually, an insolvent can apply to be rehabilitated after twelve months have elapsed from the date of confirmation of the first account, however an order may only be granted after the expiration of a period of four years. The four-year period is calculated from the date the provisional sequestration order was granted unless the Master gives a recommendation that the insolvent can be rehabilitated before the expiration of the four-year period.
If no claim was proved after six months:
If a period of six months has lapsed since the date of sequestration and no claim has been proved against the estate, the insolvent has not been previously sequestrated and have not been convicted of any fraudulent act he/she can apply to be rehabilitated.
After full payment of all proved claims:
The insolvent may apply to court any time after the Master has confirmed the distribution plan if all claims proved against the estate are paid in full. The dividends paid must include the interest accumulated since the date of sequestration.

Subject to any conditions imposed by the court, rehabilitation ends sequestration, discharges all the insolvent's pre-sequestration debts (other than those arising out of any fraud on his/her part), and relieves the insolvent of every disability resulting from sequestration.