Bankruptcy is one of the most powerful debt relief options available in South Africa. While the advantages of Bankruptcy are significant, their are some disadvantages. The one that has the most impact is the fact that an individual cannot apply for credit until credit rehabilitation occurs, which can take 24 to 36 months.
Impact on Credit Rating
Filing for Bankruptcy will inevitably have a damaging impact on your Credit Rating and the effects will remain for a period of 2-3 years or until Credit Rehabilitation occurs. In most cases by the time an individual has the need for this solution the Credit Score is already damage. The difference being that Bankruptcy stops interest charges and debt is settled quickly. It takes a much longer time to pay off debt that is accumulating legal costs and monthly interest.
Financed Vehicles
While you can keep paid up vehicles when you file for Bankruptcy financed vehicles will have to be sold, transferred or handed back to the bank.
There are instances where banks will allow you to keep financed vehicles, but this is on a case by case scenario and depends on how you have managed your vehicle repayments. We do not form part of these negotiations.
Any shortfalls acquired from auctioned or repossessed vehicles will form part of the Bankruptcy process and the shortfall will be written off.
Property must be sold
If the property has already been repossessed and there is a shortfall after the sale of the property, then that shortfall will form part of the Bankruptcy Order. If you still have a home loan with one of the banks then we suggest selling the property or transferring the property into a friend or family members name before considering filing for a Bankruptcy Order. This process works best with unsecured debt only.
Cannot be a Director of a Company
You cannot act as a member of a Closed Corporation or as a director of a company while you are Sequestrated i.e. 2-3 years. You can also not have or administrate a Trust Account. Example, Attorney’s Trust Account, Property Agents Trust Account. In some instances permission can be obtained from the Trustee, to act as a Member of a Closed Corporation or Director of a Company. This is an exception rather than a rule.