Category: Banks
You and Your Rights – Insolvency
When you cannot pay your debts (because they exceed your assets), you are said to be insolvent.
Although insolvency itself is not a crime, criminal charges can often follow the sequestration of an estate. These may be for not having kept proper records of transactions or for common law crimes such as fraudI (for instance, by obtaining credit by claiming that you can pay for goods when you know that you cannot).
If you’re insolvent, you can seek an out-of-court settlement with your creditors, surrender your estate, or in some cases apply to the magistrate’s court for an administration order. In certain circumstances, your estate may be sequestrated as insolvent at either your own initiative or that of acreditor.
Sequestration proceedings are designed to freeze an insolvent estate and to place it in the hands of a trustee, who liquidates it and distributes the proceeds among its various creditors.
If your estate is sequestrated after you have become insolvent, you may, subject to certain conditions, apply for rehabilitation. If your application is successful (if you are rehabilitated), the court will declare that you are no longer an insolvent and that you are free to trade and contract.
http://www.legalcity.net/Index.cfm?fuseaction=RIGHTS.article&ArticleID=4352017
Sequestration possible without prior NCA enforcement procedure
This was the finding of the Supreme Court of Appeal in Naidoo v ABSA Bank Limited [2010] ZACSA 72 which follows the previous judgment in Investec Bank Limited v Mutemeri 2010 (1) SA 265 GSJ which held that sequestration proceedings are not, in themselves, legal proceedings to enforce an agreement within the meaning of section 129(1)(b). A sequestration application is instituted not for the purposes of claiming something from the consumer but for the purpose of declaring the consumer insolvent. Sequestration proceedings are therefore not proceedings for the recovery of a debt. This argument is not overridden by section 130(3)(a) of the NCA even though, on one reading, the section suggests that all proceedings of which the underlying cause is a credit agreement must fall within the ambit of the NCA enforcement proceedings. Section 130 only deals with the enforcement of a credit agreement.
In the course of the judgment the court also indicated that the word “enforce” when used in section 129(1)(b) is not used in the narrow sense of enforcement of a contractual obligation but is used in the wider sense that includes cancellation of the agreement followed by cancellation remedies. This is a sensible approach that the court is likely to follow in future. It has already been the approach followed in ABSA Bank Limited v de Villiers 2009 (5) SA 40 C.
The credit provider may therefore sequestrate the consumer without pursuing section 129 enforcement proceedings under the National Credit Act. The sequestrating creditor still has to show that sequestration is in the interests of creditors.