What is involuntary sequestration?
Sequestration involves an entity (trustee or creditors) taking legal possession of an individual’s assets until debts or claims have been settled. The debtor may no longer be able to pay his or her debts due to uncontrollable circumstances such as bankruptcy. The estate of natural persons, partnerships and trusts can be sequestrated. Involuntary or forced sequestration results when a creditor can prove that the liquidity of a natural person’s estate is less than his immediate debt obligations. This can also take place when a person has committed a so-called act of insolvency.
When an unfriendly creditor brings a sequestration application against a debtor, it is known as aggressive or involuntary sequestration, as opposed to voluntary surrender. Involuntary or compulsory sequestration has the same consequences as voluntary sequestration; however, the procedure and requirements differ. Compulsory sequestration includes debtors who cannot pay off debts, therefore resulting in creditors applying to have the debtor’s estate sequestrated.
The creditor who provides the application must have made a claim against the debtor – the debtor must indeed owe them money. A second requirement is that there should be a benefit to the creditors. Lastly, the debtor must have committed an act of insolvency.