Rehabilitation After Escrow – Insolvency / Bankruptcy / Restructuring


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Our insolvency lawyers are often asked how and when a person can be rehabilitated after being sequestered. We touch on this briefly and then answer some of the most frequently asked questions below.

For more information on the sequestration process itself, please see our article What does it mean to be kidnapped?

What is rehabilitation?

A party’s insolvency ends when the insolvent is rehabilitated. Rehabilitation allows a person in receivership to make a fresh start, free from pre-receivership debts and the restrictions imposed on the insolvent by receivership.

When and how can I be rehabilitated?

There are many instances where one qualifies for rehabilitation, namely:

  1. Automatic rehabilitation after 10 years

An insolvent is automatically rehabilitated 10 years from the sequestration of his assets. The 10-year period runs from the date of provisional sequestration. However, this will not be the case if the court makes an order that the insolvent will not be automatically pardoned.

  1. Composition of at least 50 cents in the Rand

A rehabilitation order can be requested if an insolvent has obtained a certificate from the Master certifying that the creditors have accepted a composition offer in which payment or payment security has been made of at least 50c in Rand for each proven competing claim. against the estate.

  1. Expiration of the prescribed period of the first account

An insolvent can apply for rehabilitation after 12 monthshave expired from the date of confirmation by the Master of the first account of the estate. However, if:

  • the insolvent’s assets have already been placed in receivership, the above will only apply after three years; Where
  • the insolvent has already been convicted of a fraudulent act related to his or her previous or current insolvency – so the above only applies after five years.
  1. No proven claim after six months

An insolvent can apply for a pardon after a period of 6 months lapses from the date of receivership if:

  • at the time of filing the claim, no claim has been filed against the estate of the insolvent;
  • the insolvent has not been convicted of any fraudulent act related to its insolvency; and
  • the insolvent’s estate has not been sequestered before.
  1. Full payment of all proven claims

At any time after the Master has confirmed a plan of allocation providing for full payment of all proven claims with interest calculated under the Act and all escrow costs, the insolvent may apply for pardon.

It is of the utmost importance to note that even when the provisions of the law have been observed, the court is not obligated to grant pardon. An insolvent is not entitled to pardon and therefore the court has discretionary power.

What is the effect of being rehabilitated?

The rehabilitation of an insolvent has the effect of reintegrating him fully in the market and, above all, in obtaining credit. The Court is therefore as concerned about the applicant’s likely future behavior as it is about his past.Ex Parte Le Roux 1996 (2) SA 419 (C)

Basically, pardon has the effect of ending the receivership by releasing the insolvent from debts that were due or the cause of which arose before the receivership.


Do I have to repay my debts before I can apply for a pardon?

No, when you are placed in receivership, your debt devolves to a trustee who must realize the assets and distribute the proceeds from the sale of the assets among the creditors in accordance with the Insolvency Law 24 of 1936. None of your old creditors can force you to pay off the “old debt”.

How to make a request for rehabilitation?

The insolvent must give notice of intention to apply for rehabilitation by advertising in the Government Gazette, and by written notice to the master and the trustee. The insolvent must also provide security for the payment of the costs of any opposition that the insolvent may be ordered to pay. A substantive application is then lodged with the High Court depending on the insolvent’s place of residence.

When I am rehabilitated, am I reinvested with my old assets?

No, except in two cases if part of your estate remains:

  • When a composition provides that the estate will reinvest in the insolvent; and
  • When the reason for the rehabilitation is the fact that no claim has been filed within six months of the receivership.

March 7, 2019

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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