Rehabilitation

When you cannot pay your debts (because they exceed your assets), you are said to be insolvent.

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 a creditor.

As an unrehabilitated insolvent, it is unlawful to incur credit (without your trustee’s written consent) and you are obliged to advise all your creditors that you are an unrehabilitated insolvent. It is, of course, not a bad idea to pay for all your purchases in cash, but often this is not practical especially when you have been accustomed to using credit cards and a cheque book. That will no longer be possible.

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 once more free to trade and contract.

You cannot apply for your rehabilitation (as a general rule) until the lapse of 4 years unless the Master of the Supreme Court has recommended such earlier rehabilitation. If you take no steps to apply for your rehabilitation, you will be rehabilitated automatically 10 years after your sequestration.