- Rehabilitation restores your legal and financial status after insolvency.
- Different timeframes apply depending on prior convictions and whether debts were settled.
- If no action is taken, automatic rehabilitation happens after 10 years unless stopped by court.
Insolvency occurs when a person’s estate, which includes all their money, property, and belongings, is placed under sequestration. This means the estate is placed under legal control until specific legal conditions or timeframes are met.
If you are married in community of property, this affects both you and your spouse, because the law sees your joint estate as one and the same. If one becomes insolvent, so does the other.
Why rehabilitation matters and what it allows you to do
Rehabilitation is the legal process through which an insolvent person’s status is restored to that of an ordinary person, free of the restrictions that come with sequestration. Once you are rehabilitated, you may enter contracts again, apply for credit without disclosing past insolvency, and hold positions that would otherwise be restricted, such as company directorships. It is not merely a financial restart, but also a way to clear your name and restore your legal standing in society.
Who may bring an application for rehabilitation under the law
According to the Insolvency Act of 1936, the person whose estate was sequestrated is allowed to apply for rehabilitation. If the insolvent person is not in the country, a duly authorised agent may apply on their behalf. The spouse of the insolvent person, if the couple was married in community of property, also has the right to bring an application. This right remains even if that spouse is now widowed or divorced. Where the insolvent person has died, the executor of their deceased estate may also apply for rehabilitation.
When an insolvent person can apply for rehabilitation
The timing of the application depends on the circumstances surrounding the insolvency. In certain cases, an application may be brought at any time. This happens when creditors, representing at least three quarters in both number and value, have accepted an offer of composition, and payment has either been made or secured. A person may also apply at any time if they have paid all the creditors in full, including all costs associated with the sequestration process.
If no creditor has submitted a claim against the estate and the insolvent person has not previously been declared insolvent or convicted of certain offences under the Act, then an application for rehabilitation may be made after six months have passed from the date of sequestration.
If the insolvent person has not been convicted and has not previously been sequestrated, they may apply for rehabilitation after a year has passed since the Master of the High Court confirmed the first trustee’s account.
If there has been a prior sequestration, but no convictions, then the person must wait three years from the date of the Master’s confirmation of the first trustee’s account before they can apply.
If the person was convicted of certain offences under the Insolvency Act, then the law requires them to wait five years from the date of conviction before they can bring an application for rehabilitation.
What happens after 10 years if no application is made
Importantly, the law provides for a form of automatic rehabilitation. If no application is brought within 10 years, and no court intervenes, the insolvent person is deemed to be rehabilitated. However, this automatic rehabilitation can be stopped by a court, provided that an interested person applies for such intervention before the 10-year period comes to an end.
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