“Rehabilitation” is the legal process by which an Insolvent (a sequestrated individual) is relieved of the legal implications of being an Insolvent and restored to the legal status of a credit worthy consumer (a “solvent”). The process is also governed by the Insolvency Act (Act 24 of 1936).
- the Sequestration is brought to an end;
- all debts of the Insolvent which were due (or the cause of which arose) before the Sequestration, which did not arise out of any fraud by the Insolvent, are discharged; and
- the Insolvent is relieved of any disability resulting from the Sequestration.
Applying for Rehabilitation
Rehabilitation occurs automatically after the expiry of a 10 year period from date of sequestration, unless a Court orders otherwise. There also exist other circumstances under the Act in which an Insolvent can apply for rehabilitation before expiration of 10 years:
- Any time after Sequestration, the Insolvent may approach their Trustee to accept a proposal where creditors will be paid 50 cents in the Rand and provide sufficient security therefor. The Master then issues a certificate and the Insolvent can apply for Rehabilitation (Statutory Composition);
- The Insolvent may apply for Rehabilitation 12 months after creditors have proven claims against the insolvent estate, and four years since date of Sequestration has elapsed. The Master may further, after confirmation of the trustees’ first liquidation account, recommend Rehabilitation if such is to the advantage of South Africa, commerce, or the previously disadvantaged;
- If the Insolvent has been previously sequestrated (and rehabilitated) he/she may apply for Rehabilitation if (i) 4 years have elapsed since their Sequestration and (ii) 3 years have elapsed since the date of confirmation of the trustees’ first liquidation account;
- If the Insolvent has been found guilty of a criminal offence in his/her insolvent estate, the Insolvent may only be allowed to apply for Rehabilitation after 5 years have elapsed since the date that criminal Judgment was passed;
- If no claims are proven by creditors within 6 months from date of Sequestration, the Insolvent may bring an application for Rehabilitation;
- Where the assets in the insolvent estate realise sufficient funds to pay all proven claims in full, the Insolvent immediately qualifies to apply for Rehabilitation.