• An insolvency enquiry can be described a process by which the insolvent and/or any other relevant parties are interrogated to get information regarding the assets and other relevant affairs pertaining to the insolvent estate.
• Insolvency enquiries can be beneficial to the all the creditors. It is by conducting such enquiries that trustees / liquidators are able to determine what the assets and who the creditors and contributories are. It also allows them to properly investigate doubtful claims against the insolvent estate.
• Section 65 of the Insolvency Act 24 of 1936 regulates an insolvency enquiry.
• The main purpose of an insolvency enquiry is to obtain information about your insolvent estate should you not have made full disclosure or should you have hidden assets and the trustee finds out about it.
• Many parties can be called upon to take part in the enquiry i.e., your family members, your employees as well as any person who has information about your insolvent estate.
• Failure to attend the enquiry is a criminal offence and you can be charged criminally.
• Failure or refusal to make full disclosure about the affairs at the enquiry is a criminal offence.

Criminal charges can be brought in the below circumstances:

• Concealing or destroying books or assets (Section 132 of Insolvency Act 24 of 1936).
• Concealment of liabilities or pretext to existence of assets (Section 133 of Insolvency Act 24 of 1936).
• Failure to keep proper records (Section 134 of Insolvency Act 24 of 1936).
• Fraudulently preferred creditors or incurred debt without the reasonable expectation that you can pay such debt (Section 135 of Insolvency Act 24 of 1936).
• Failure to give information or to deliver assets or books (Section 136 of Insolvency Act 24 of 1936).
• Obtained credit during insolvency without disclosing that you are insolvent (Section 137 of Insolvency Act 24 of 1936).
• Failure to attend meetings of creditors or give certain information (Section 138 of Insolvency Act 24 of 1936)
• Failure to appear or to give evidence or giving false evidence (Section 139 of Insolvency Act 24 of 1936).

Once we have assessed your matter and find that you could be sequestrated the matter will be referred to an attorney. If the attorney proceeds with the matter you need not deal with further harassment from any creditor. Your creditors can simply be told that you are in the process of sequestrating and that they can contact your attorney.

• In terms of Section 23(5) of the Insolvency Act 24 of 1936 the appointed trustee can attach any part of your salary which the trustee deems not necessary for your normal expenditure. This rarely happens.
• Generally, after sequestration no creditor can attach your salary whether by using a garnish order or otherwise.

• All furniture that is valued will fall in the insolvent estate.
• In most circumstances the trustees will allow you to buy back your furniture at the valued amount over a period of time.
• You may if agreed with the appointed trustee, retain your furniture, and make payments to the trustee until the full amount as valued is paid up.
• The above is strictly subject to agreement with the trustee.

• Retirement annuities.
• Damages awarded in respect of a personal injury law or defamation claim.
• Ceded policies.
• Maintenance payments in term of a court order.
• Certain assets under a rental agreement.
• Parking tickets, speeding fines, licenses etc.
• Utility accounts.
• Clothes, bedding, tools and other essential means of subsistence.
• Life insurance policies.

You are allowed to form a new business subject to certain conditions and the consent of the trustee. We will provide you with further advise should you require same.

• You will be able to reside in your property for a certain period from the date that the sequestration proceedings are initiated.
• It could take some time to have the sequestration order granted, have the trustee appointed by the Master of the High Court and to finalise the required creditor meetings.
• The whole process is timeous and only on instruction of the trustee the immovable property must be vacated.
• After vacating the property, you will be allowed to rent a property.

• If you own a motor vehicle under a hire purchase agreement the creditor who financed, the motor vehicle can take possession of the motor vehicle after the sequestration order is granted.
• If however the vehicle is financed on a lease or rental agreement, the creditor has an option to allow you to have possession of the vehicle. This will obviously be subject to you continuing to make payment towards such creditor.
• A creditor can approach the court before granting of the sequestration order for possession of the motor vehicle.
• It is possible to enter into agreements with certain entities to obtain a motor vehicle after sequestration This is subject to their terms and conditions.
• Many people arrange with a family member or friend to purchase a vehicle for them after sequestration from a third party which they then use and pay for. It is important to obtain proper advice relating to such agreements and the implications thereof.
• In certain circumstances you will have to accept the fact that your motor vehicle will be re possessed.
• Your vehicle can only be re possessed by the sheriff with a court order.

• A bank will allow you to open an account subject to its applicable terms.
• It is vital to open a bank account with a banking institution that you do not owe any money. Such a bank may take your money if any funds and/or your salary is paid into an account on which monies are due.
• Although creditors are not allowed to attach monies post sequestration the above suggestion is simply made to prevent any prejudice to you.

You are not allowed to pay your creditors after lodging the application for sequestration. You will be preferring one creditor above another same which is unlawful in terms of the Insolvency Act 24 of 1936.

• Under normal circumstances you may not be dismissed from your employment if you are sequestrated.
• It is however important to note that you can be excluded from being the director of a company, a member of a close corporation and to practise certain careers while under sequestration i.e., attorney, sheriff, auditor and accountant.
• If your employment agreement entails that you are not allowed to be declared insolvent / sequestrated same can result in, you not being able to continue employment with that employer. The terms of your employment agreement will be very important in this instance.

You can be sequestrated even if being declared over indebted and thus being under debt review. The process to be followed will be canvassed should same be necessary and applicable to your matter.

MARRIED IN COMMUNITY OF PROPERTY

• Should you be married in community of property both spouses will have to apply for sequestration in respect of the joint debt incurred.

MARRIED OUT OF COMMUNITY OF PROPERTY, WITH OR WITHOUT ACCRUAL

• Only the spouse who is insolvent need apply without affecting the legal status of the other spouse.
• The trustee and/or creditors cannot claim the accrual of the solvent spouse as long as the marriage is not dissolved.
• Spouses are allowed to make donations to each other in terms of the Matrimonial Property Act 88 of 1984.
• If a donation however amounts to an impeachable disposition, the trustee may recover such alienated property.

• You cannot obtain a credit card during sequestration. You will be listed on the various credit bureaus which will affect your credit status negatively.
• Once rehabilitated your credit status will be updated and you could be able to incur debt.
• In terms of Section 20(2)(b) of the Insolvency Act 24 of 1936, all assets you acquire after sequestration form part of your insolvent estate.
• If you have however incurred debt after sequestration such a creditor may have a claim against your new estate.
• Should you have entered into a credit agreement and you have not disclosed to the creditor that you are insolvent, such a creditor can lay a criminal charge against you. 
• Liability based on a damages claim against you, (e.g. motor vehicle accident) is not deemed to be a debt that you have incurred.
• Any creditor can effectively allow you credit after sequestration, but it must be disclosed that you are insolvent before obtaining such credit.
• If the creditor is aware of the fact that you are insolvent and still gives you credit, then the agreement is legal and binding on both parties.
• It is important to understand that it is not a criminal offence to default on debt payments. You will not be criminally charged for not paying your debt.

Each application for voluntary surrender must be attended to on its own merits. All debt whether national and/or international must be declared / disclosed.

• The trustee is appointed by the Master of the High Court, and more than one trustee can be appointed.
• The trustee is responsible for the administration of the insolvent estate.
• It is advisable that you adhere to all requests made by the trustee and to assist the trustee with all queries. 

Once sequestrated your employees employment is deemed terminated. They will however be regarded as creditors of the insolvent estate.

• SARS is a preferred creditor.
• SARS receives payment before any of your concurrent creditors (those creditors who do not hold any security).
• It must be proven to court that your preferred creditors will be paid in full otherwise no such order will be granted.
• Should the full amount of VAT not be paid to SARS in winding up of the estate the balance can effectively be written off.
• It important to note that not paying SARS can result in SARS taking criminal action against you irrespective of your sequestration status.
• After sequestration SARS will issue you with a new tax number.
• After sequestration, all new amounts due to or owed to you by SARS will fall in your new estate.

• Under certain circumstances it is possible to have a judgment rescinded.
• Certain debts prescribe after a certain period in terms of applicable legislation.

The categories of voidable dispositions are as follows:

• Dispositions without value (Section 26 of the Insolvency Act).
• Antenuptial contracts (Section 27 of the Insolvency Act).
• Voidable Preferences (Section 29 of the Insolvency Act).
• Undue preferences (Section 30 of the Insolvency Act).
• Collusive dealings (Section 31 of the Insolvency Act).
• Voidable transfer of business (Section 34 of the Insolvency Act).

• ‘Disposition’ is defined as any transfer or abandonment of rights to property. The definition includes a sale, lease, mortgage, pledge, delivery, payment, release, compromise, donation, or any contract therefor, but does not include a disposition in compliance with an order of court.

• A distinguishing feature of such a disposition is that the insolvent was under no obligation to make it: assets were given away without the insolvent receiving any advantage in return.

• Every disposition of property not made for value may be set aside by the court if the disposition was made by an insolvent:

           a.) more than two (2) years before the sequestration of his estate and it is proved that immediately after the disposition was made the liabilities of the insolvent exceeded his assets; or

            b.) within two (2) years of the sequestration of his estate and the person claiming under or benefiting by the disposition is unable to prove that immediately after the disposition was made the assets of the insolvent exceeded his liabilities.

• The concept of a disposition not made for value includes a donation or payment under the illegal contract, and a payment under an invalid guarantee.

• Dispositions not made for value are statutorily voidable by a court of competent jurisdiction, but they are binding unless and until they are set aside by an order of court.

A settlement of property in an antenuptial contract (also known as a premarital contract) by a husband on his wife or on any child born or to be born of the marriage may not be set aside as a disposition without value if certain requirements are met.  These are:

a.) The settlement must be an immediate benefit, in other words, it must be a benefit given by transfer, delivery, payment, cession, pledge or special mortgage of property completed before the expiry of a period of three (3)

b.) months from the date of the marriage.

c.) The settlement must be given under a duly registered antenuptial contract.

d.) The settlement must be given in good faith. 

e.) The husband’s estate must not have been sequestrated within two (2) years from the date of registration of the antenuptial contract.

• The purpose of section 29 of the Insolvency Act 24 of 1936 relating to the setting aside of voidable preferences is that a person on the verge of insolvency, who cannot satisfy the claims of all his creditors and whose estate is in fact subsequently sequestrated, should not be permitted to select for payment out of a number of creditors one who has no  right to such selection.

• The essence of this section is that the person to whom the disposition was made was a creditor of the insolvent, that is, a person to whom the insolvent was indebted for value received.

• In order to succeed in having a disposition set aside as a voidable preference the trustee must prove the following:

a.) There was a disposition by the debtor to a creditor, or to third party, in such a way that the creditor would benefit from the disposition.

b.) The debtor made the disposition not more than six (6) months before sequestration of his estate or, if the debtor is deceased and his estate is insolvent, not more than six (6) months before his death.

c.) The disposition had the effect of preferring one of the debtor’s creditors above another.

d.) Immediately after the disposition the creditor’s liabilities exceeded the value of his assets.

Once the trustee has proved the four (4) requirements listed above, the disposition may be set aside by the court, but the person in whose favour the disposition was made may resist the setting aside of the disposition by proving that:

a.) The disposition was made in the ordinary course of business; and

b.) it was not intended to prefer one creditor above another.

• If a debtor made a disposition of his property at a time when his liabilities exceeded his assets with the intention of preferring one his creditors above another and his estate is subsequently sequestrated, the court may set aside the disposition.

• No time limit applies to undue preferences. In order to succeed in having a disposition set aside as an undue preference, the trustee must prove the following:

a.) There was a disposition by the debtor of his property.

b.) At the time the disposition was made, the debtor’s liabilities exceeded his assets.

c.) The disposition was made to a creditor.

d.) The debtor intended to prefer one of his creditors above another.

e.) The debtor’s estate was subsequently sequestrated.

• The intention to prefer may be ascertained by looking at all the surrounding circumstances (circumstantial evidence). It could be that certain actions could not be avoided because of the financial difficulties of the insolvent, i.e. he had no other choice but to pay and the creditor had a valid agreement to take the goods.

• After the sequestration of the debtor’s estate the court may set aside any transaction entered into by the debtor before sequestration, by which he, in collusion with another person, disposed of property belonging to him in a manner which had the effect of prejudicing his creditors or of preferring one of his creditors above another. 

• The essential feature that distinguishes this type of disposition from the three (3) discussed above is the element of collusion between the debtor and some other person. The intention to defraud and knowledge of the financial position of the debtor are factors that the court would look at.

• The collusion transaction must have been entered into before the sequestration of the debtor’s estate. Any person who was a party to a collusive disposition exposes himself to attack on the following three (3) grounds:

a.) He is liable to make good any loss caused by the disposition to the insolvent estate.

b.) He must pay for the benefit of the estate, by way of penalty, a sum awarded by the court. This sum may not exceed the amount by which he would have benefited by such dealing had it not been set aside.

c.) If the person who was a party to the collusion is a creditor he also forfeits his claim against the estate. 

• Section 34(1) of the Insolvency Act 24 of 1936 reads as follows:

• If a trader transfers in terms of a contract any business belonging to him, or the goodwill of such business, or any goods or property forming part thereof (except in the ordinary course of that business or for securing the payment of a debt), and such trader has not published a notice of such intended transfer in the Gazette, and in two (2) issues of an Afrikaans and two (2) issues of an English newspaper circulating in the district in which that business is carried on, within a period not less than thirty (30) days and not more than sixty (60) days before the date of such transfer, the said transfer shall be void as against his creditors for a period of six (6) months after such transfer, and shall be void against the trustee of his estate, if his estate is sequestrated at any time within the said period.

• It is clear from the above that a transfer by a trader in terms of a contract of a business or the goodwill of such business, or any goods or property forming part thereof could be set aside if the seller did not adhere to Section 34.

Therefore, a transfer has to meet the following requirements in order not to be set aside:

• It must be done in the ordinary course of that business.

• It must be done to secure the payment of a debt.

• Unless these requirements are met the required advertisements had to have been placed. It is a factual question as to whether an act was done in the ordinary course of business.