When a person is sequestrated, their estate is placed in the hands of a trustee, who sells the assets to repay creditors, and the person is declared insolvent. Being an unrehabilitated insolvent comes with real restrictions — you cannot freely obtain credit, and you cannot hold a company directorship, among other limits.
Rehabilitation is the legal process, under the Insolvency Act 24 of 1936, that ends your insolvency. Once you are rehabilitated, the sequestration comes to an end, your pre-sequestration debts are discharged, and the restrictions fall away. In the words of the courts, its purpose is to “restore the insolvent to the marketplace” — you can obtain credit again and hold a directorship.
If you do nothing, you are automatically rehabilitated after 10 years from the date of the provisional sequestration order (Section 127A of the Insolvency Act). For most people, that is a long time to carry the restrictions — which is why many apply to court sooner.
You can apply to the High Court to be rehabilitated before the 10 years is up. The ordinary route is four years after sequestration (Section 124), but earlier applications are possible in specific situations — for example after six months if no claims were proved against your estate, after a composition where creditors are paid at least 50 cents in the rand, or once all proved claims have been paid in full.
Rehabilitation is discretionary — the court is not obliged to grant it, and applies a “fit and proper person” test — but most compliant applicants qualify.
A rehabilitation application is brought in the same division of the High Court that granted the sequestration. You must give notice of your intention to apply by advertising in the Government Gazette and notifying the Master of the High Court and the trustee. The application is brought on affidavit, so in most cases you need not appear in person. We handle this together with qualified attorneys.
Once you are rehabilitated, the sequestration is removed from your credit record and your status is updated to “rehabilitated”, which then remains for five years under the National Credit Act regulations. That order needs to be submitted to the bureaus — something we take care of. If you are ready, see our rehabilitation after sequestration service.
Further reading: our sister company The Debt Company on rehabilitation after sequestration, and insolvency specialists at Insolvensies.
This article is general information about South African credit and is not legal or financial advice. CleanCredit, a division of The Debt Company, assists with qualifying credit-record matters in line with the National Credit Act. We do not provide loans or debt consolidation and cannot remove accurate, valid or current debt. A free assessment carries no obligation.
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