Debt Review vs. Sequestration: A Critical Choice
These are two vastly different legal solutions for debt. Our experts explain the pros and cons to help you understand the options.
When facing overwhelming debt, South African law provides two primary avenues for relief: Debt Review and Sequestration. They are not interchangeable. They are fundamentally different legal processes with vastly different outcomes. Making the right choice is critical and requires expert legal and financial advice.
Debt Review: A Path to Repayment
Debt review is a process designed to help you repay your debt in full under more manageable terms.
- The Goal: To restructure your payments to make them affordable, allowing you to eventually become debt-free while keeping your assets.
- The Process: A registered debt counsellor negotiates with your creditors for lower monthly payments. This new plan is then made an order of the court.
- Assets: You keep your assets, including your home and car.
- Credit Report: A flag is placed on your credit report, but it is removed once the process is complete and a Clearance Certificate is issued.
- Who it's for: Someone with a steady income who is committed to repaying their debt but is currently unable to afford the installments.
Sequestration: A Path to Insolvency
Sequestration is a High Court process where you are declared legally bankrupt. It is a more drastic measure that writes off up to 80% of your debt because you have no realistic way of ever paying it back.
- The Goal: To provide a fresh start when your liabilities massively exceed your assets and income.
- The Process: An attorney applies to the High Court to have you declared insolvent. A trustee is appointed to sell your assets, and the proceeds are distributed to your creditors.
- Assets: You lose your assets. Your house, car, and other valuables will be sold.
- Credit Report: A sequestration is a severe negative listing that remains on your report for up to 10 years, or until you are legally "rehabilitated" by another court order.
- Who it's for: Someone with an insurmountable level of debt and insufficient income to even consider a restructured payment plan. It is the absolute last resort.
Key Differences: The Expert View
| Feature | Debt Review (Repayment) | Sequestration (Insolvency) |
|---|---|---|
| Outcome | You repay 100% of your debt over time. | Most of your debt is written off. |
| Assets | You keep your assets. | You lose your assets. |
| Legal Forum | Magistrate's Court. | High Court. |
| Credit Impact | Serious, but fully recoverable upon completion. | Devastating and very long-term. |
Choosing between these two legal paths is one of the most important financial decisions you can make. It should never be done without a thorough, confidential assessment from a professional. The team at Dispute It and our legal partners can analyze your unique situation and advise on the correct and most beneficial path for you.
The credit repair process is complex and requires specialist knowledge to ensure success. Don't risk handling it alone. Our experts at Dispute It are ready to manage your case and deliver results.