2014 / 06 / 01
An insolvent’s status as such is terminated by rehabilitation. A court may grant a rehabilitation order on application by the insolvent within a comparatively short time from sequestration, on condition that the claims have been paid in full or an offer of composition has been accepted by the creditors and payment has been made of at least 50 cents in the rand on all claims.
A rehabilitation order has the effect of putting an end to the sequestration of the debtor’s estate, of discharging all the insolvent’s debts due before sequestration, and of relieving the insolvent of every disability resulting from the sequestration.
Rehabilitation is a legal process which happens, in some instances automatically or by order of the High Court of South Africa, whereby the insolvent is relieved of the legal implications of being insolvent and put back into a legal position of someone who is or was not declared insolvent.
As a law firm with qualified personnel we have the ability to assist a person with the application but in order to bring a rehabilitation application the insolvent person must first give notice of his intention to bring such an application by advertising in the Government Gazette, as well as give notice to the Master of the High Court, their intention to do so. The attorney thereafter, obtains permission from the curator* that the insolvent may rehabilitate.
*The curator – will be the person who was appointed after the initial sequestration order to finalize the insolvent estate.
There are various circumstances under which one can apply for rehabilitation the most famous of which is through the lapse of time. The insolvent person has to inter alia prove what his/her income and expenses are and that he/she is able to provide for him/herself as well.
There are 7 Sections in the Insolvency Act that deal with 8 circumstances under which an insolvent person may Rehabilitate. They each have their own time frames.
Any insolvent person not rehabilitated by the court within a period of ten years from the date of sequestration of his estate shall be deemed to be rehabilitated after the expiry of that period.
The general time period before an insolvent can make an application for rehabilitation is 4 years after date of provisional sequestration.
Rehabilitation puts an end to sequestration. With a rehabilitation order, all debts are discharged, the insolvent does not have to pay any of them. The debts mentioned here refer to all debt incurred up to and including date of sequestration. This includes foreign debts in terms of which judgment was granted by a foreign court after sequestration.
Debts incurred after the date of sequestration must still be paid in full by the insolvent person, but it is best not to incur any debts after sequestration without consulting the curator in any case.
The fact that a rehabilitation order has been granted by a Court does not mean that the insolvent’s blacklisting on ITC is removed automatically.
Judgments that were previously listed on the records of any credit bureau must be removed as such judgments have lapsed. Some credit bureau divisions refuse to remove these judgments, but this is incorrect, as the judgments are no longer valid.
“ITC clearance” must still be arranged after the rehabilitation order has been granted. This entails that a copy of the rehabilitation order must be forwarded to the credit bureau.
On ITC the insolvent will be listed as “rehabilitated”. We find that the banks have no problem granting bonds or other debts once persons have been rehabilitated. The “rehabilitation” listing will remain on ITC for 5 years thereafter it will be removed.