(in terms of the Insolvency Act, Act 24 of 1936)
Several clients have requested us to provide them with a brief explanation of the procedure to be followed in filing for bankruptcy. This is an attempt to do so specifically for our clients or prospective clients chose this route as a debt solution, from our administrative viewpoint, bearing in mind all the relevant time constraints. We also included the relevant sections of the Insolvency Act for easy referral and convenience.
In terms of Section 3 of the Insolvency Act an insolvent debtor or his agent may petition the court for the acceptance of the surrender of the debtor’s estate for the benefit of his creditors. This process, which is done by way of application to the relevant High Court, is also commonly referred to as ‘filing for bankruptcy’, a ‘voluntary surrender’ or a ‘voluntary sequestration’. Although none of our clients ever had to appear in court, the court may direct the petitioner or any other person to appear and be examined before the court in terms of Section 3.
Step 1 – (100% free service )
A potential client e-mails us or phones us, and requests our assistance or advice. We establish contact and request that an excel spreadsheet be completed in order to obtain the relevant contact details and debt information.
You may request the spreadsheet by e-mail of download it by clicking on the link below:
After we receive back the spreadsheet, we will process it, and might, if need be, request more information on a specific creditor or creditors if the information we received is inadequate.
Once the information is processed to our satisfaction, any viable alternatives to filing for bankruptcy will be considered and we will draft a Debt Profile on our client. This will enable us to determine and advise our client as to the minimum value their estate will require in unencumbered assets, e.g. cash, assets (anything of value) or a combination of both, to file for bankruptcy successfully. It would also include the minimum instalments payable over an 24 month period.
We will then e-mail our client our assessment and a summary of the Debt Profile, comprising of two options: Option 1 – Debt Repayment by way of voluntary distribution as opposed to Option 2 – Filing for Bankruptcy.
Step 2 – (100% free service )
We will request our client to call us at their convenience to discuss the matter in detail telephonically and obtain their instruction to proceed.
Remember that the court will only accept the surrender of your estate if it is considered to be for the benefit of your creditors (Section 3). We will advise you, if needed, as to any possible asset restructuring and/or asset acquisition options to achieve the aforementioned minimum value, legally.
We will also discuss the re-purchase of assets, timetable for the application, etc. We will require a deposit before commencing with Step 3, to cover at least some of our foreseeable disbursements. Payment of the deposit will be arranged individually with each client.
Our fees and the remainder of our disbursements will be recovered from the insolvent estate itself, once the application was successful.
* Note: Only once we have received proof of payment of at least 50% of the deposit, will we proceed with the next step.
At this time we should have received enough debt information to enable us to draft a provisional Statement of Affairs (a list of our clients assets and liabilities in a prescribed form) in order to eventually comply with Section 4(3):
“The petitioner shall lodge at the office of the Master a statement in duplicate of the debtor’s affairs, framed in a form corresponding substantially with Form B in the First Schedule to this Act. That statement shall contain the particulars for which provision is made in the said Form, shall comply with any requirements contained therein and shall be verified by an affidavit (which shall be free from stamp duty) in the form set forth therein.”
To do this we will require the following information on each and every one of our client’s creditors:
1) Name of creditor;
2) Complete postal address;
3) Postal Code;
4) Amount client owes / balance due to the relevant creditor;
5) Reason for debt e.g. assets financed; lease agreement; hire purchase; instalment sale agreement; monies loaned and advanced; services rendered or goods sold.
6) Confirmation whether or not the creditor has any form of security for payment of his claim, e.g. mortgage bond, retained ownership of an asset (vehicle finance) etc.
A provisional Statement of Affairs will then be sent to our client by e-mail for perusal. This will enable us to discuss any possible inadequacies, corrections or changes and the overall effect it will have, prior to signature of the document.
At this stage we will proceed to arrange for a valuation of our client’s assets by a sworn appraiser of our choice, to validate the value listed in the provisional Statement of Affairs as required by the Court and Master of the High Court. Ownership of these assets will eventually vest in the Trustee appointed by the Master once the application is granted, but may be re-purchased by our client from the insolvent estate – Please refer to our FAQ (Frequently Asked Questions) segment for any questions in this regard, and note that this would also be discussed with in detail with our client during Step 2.
Should the asset value be inadequate, we will advise our client as to any possible asset restructuring and/or asset acquisition options (as would also have been previously discussed in Step 2) to achieve the aforementioned minimum value, legally.
The necessary changes will be made to the provisional Statement of Affairs in order to finalize it, where after it will be re-sent to our client by e-mail once again, for perusal and signature. The document will have to be printed in duplicate and both copies must be signed before a Commissioner of Oaths. Full instructions in this regard will accompany the document.
Once signed and commissioned, both copies must be mailed back to us via overnight mail or courier.
Once we receive the Statement of Affairs back, in duplicate, we will proceed to draft and place the necessary advertisements for publication, in order to comply with Section 4(1):
“(1) Before presenting a petition mentioned in section three the person who intends to present the petition (in this section referred to as the petitioner) shall cause to be published in the Gazette and in a newspaper circulating in the district in which the debtor resides, or, if the debtor is a trader, in the district in which his principal place of business is situated, a notice of surrender in a form corresponding substantially with Form A in the First Schedule to this Act. The said notice shall be published not more than thirty days and not less than fourteen days before the date stated in the notice of surrender as the date upon which application will be made to the court for acceptance of the surrender of the estate of the debtor.”
Once these advertisement have been published (they must be approved before 15h00 on a Friday in order to appear the following Friday) our client will be under the protection of the Insolvency Act and creditors may no longer instruct the Sheriff of the Court to attach and sell our client’s property, as Section 5 will apply:
“After the publication of a notice of surrender in the Gazette in terms of section four, it shall not be lawful to sell any property of the estate in question, which has been attached under writ of execution or other process, unless the person charged with the execution of the writ or other process could not have known of the publication: Provided that the Master, if in his opinion the value of any such property does not exceed R5 000, or the Court, if it exceeds that amount, may order the sale of the property attached and direct how the proceeds of the sale shall be applied.”
*NOTE: The court date will appear in the advert and it must be within 30 days of date of publication.
The Statement of Affairs will then be sent by us via overnight mail or courier to the relevant Master of the High Court and if applicable, Magistrate’s office, in order to comply with Section 4, subsections (3), (5) and (6):
“(3) The petitioner shall lodge at the office of the Master a statement in duplicate of the debtor’s affairs, framed in a form corresponding substantially with Form B in the First Schedule to this Act. That statement shall contain the particulars for which provision is made in the said Form, shall comply with any requirements contained therein and shall be verified by an affidavit (which shall be free from stamp duty) in the form set forth therein.”
“(5) If the debtor resides or carries on business as a trader in any district (other than the district of Wynberg, Simonstown or Bellville in the Province of the Cape of Good Hope) wherein there is no Master’s office, the petitioner shall also lodge a copy of the said statement at the office of the magistrate of the district, or, if the debtor resides or so carries on business in a portion of such district in respect of which an additional or assistant magistrate permanently carries out the functions of the magistrate of the district at a place other than the seat of magistracy of that district, at the office of such additional or assistant magistrate.”
“(6) The said statement shall be open to the inspection of any creditor of the debtor during office hours for a period of fourteen days from a date to be mentioned in the notice of surrender.”
We will then proceed to inform our client’s creditors by registered mail of the pending application as required by Section 4(2):
“(a) Within a period of seven days as from the date of publication of the said notice in the Gazette, the petitioner must deliver or post a copy of the said notice to every one of the creditors of the debtor in question whose address he or she knows or can ascertain.
(b) The petitioner must further, within the period referred to in paragraph (a), furnish a copy of the notice—
(i) by post to every registered trade union that, to the petitioner’s knowledge, represents any of the debtor’s employees; and
(ii) to the employees themselves—
(aa) by affixing a copy of the notice to any notice board to which the employees have access inside the debtor’s premises; or
(bb) if there is no access to the premises by the employees, by affixing a copy of the notice to the front gate of the premises, where applicable, failing which to the front door of the premises from which the debtor conducted any business immediately prior to the surrender; and
(iii) by post to the South African Revenue Service.”
Once all of the aforementioned sections have been complied with, we will proceed to draft and issue the Notice of Motion, thus reserving a place on the court roll for the application to be heard. Our client’s founding affidavit and any necessary supporting affidavits will also be drafted and e-mailed to our client for perusal and approval.
In the founding affidavit, we will have to deal with the reason for our client’s insolvency, monthly expenditure and certain other law prescribed aspects as well as court ordained practises.
As soon as we receive our client’s approval, we will arrange for signature of the relevant affidavits. Our client’s affidavit will have to be printed and must be signed before a Commissioner of Oaths – the same process will be followed as had been the case with signature of the Statement of Affairs earlier. Once signed and commissioned, it must be mailed back to us via overnight mail or courier.
Once the document is back in our possession, we will compile the application, index and paginate all the pages and supporting evidence. The application will be scanned and the necessary copies will be made for service on all the relevant parties required.
A copy of the application will then be served on the relevant Master of the High Court, the Receiver of Revenue (only if required), whilst the original will be filed with the Registrar of the High Court (at least 48 hours before the court date or earlier if so required)
A copy will then be sent to our Advocate along with our brief (our instructions).
The application (for bankruptcy) will then serve before the High Court and if needed our Advocate will argue the case on our behalf. Our client’s presence will not be required. Section 6 will then apply:
“If the court is satisfied that the provisions of section four have been complied with, that the estate of the debtor in question is insolvent, that he owns realizable property of a sufficient value to defray all costs of the sequestration which will in terms of this Act be payable out of the free residue of his estate and that it will be to the advantage of creditors of the debtor if his estate is sequestrated, it may accept the surrender of the debtor’s estate and make an order sequestrating that estate.”
- The Insolvency Division -