While the advantages of Sequestration 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 i.e. 24 to 48 months.
Impact on Credit Rating
Sequestration will inevitably have a damaging impact on your Credit Rating and the effects will remain for a period of 2-4 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 Sequestration 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 Sequestrate, 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 previously managed your vehicle repayments. We do not form part of these negotiations. Any shortfalls from auctioned or repossessed vehicles will form part of the Sequestration 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 Sequestrated Estate. 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 Sequestration. 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. 2-4 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.
Here is some more information?
The sequestration process involves a Court Application. The Applicant will be either yourself, in the event of Voluntary Surrender, or one of your Creditors (either a friendly or aggressive Creditor).
Perhaps the most significant benefit to be gained from Sequestration is that it enables an individual to draw a line under their unsecured debt problems and start moving forward. A fresh financial start.