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In this guide
By Onah Attorneys Inc • Updated July 2026 • Legal information, not a substitute for advice on your specific matter.
When debt becomes unpayable, South African law offers two structured exits: debt review (restructure and pay everything, slower) and sequestration (liquidate, distribute, write off the rest). The industries around each will sell you their product; the honest answer depends on arithmetic — your assets, your income, and how deep the hole is. Here is the unsold comparison.
Debt review: the restructure
Under the National Credit Act, a debt counsellor declares you over-indebted, negotiates reduced instalments and extended terms with all credit providers, and a court or tribunal makes it an order. You keep your assets, pay one consolidated instalment, and creditors cannot enforce while you comply. The catch: you repay everything, plus interest, over years longer — and you’re flagged under review, unable to take new credit, until a clearance certificate issues (all debts bar the bond settled).
Sequestration: the reset
Voluntary surrender under the Insolvency Act liquidates your estate: a trustee sells non-exempt assets, creditors receive a distribution (the court must be satisfied of advantage to creditors — typically 20c+ in the rand), and on rehabilitation the unpaid balance is written off. You lose non-exempt assets but keep salary going forward, and the total cash outflow is usually a fraction of debt review’s. The costs: High Court application, insolvent status until rehabilitation, and restrictions (credit, directorships, certain professions) meanwhile.
The arithmetic that decides
Deep insolvency (debts several multiples of annual income, little equity to protect): sequestration usually wins — paying 20–30% through a trustee beats paying 100%+ plus interest over a decade. Shallow trouble (temporary squeeze, valuable home equity, debts manageable if restretched): debt review protects the assets sequestration would sell. The pivot question: how much of your debt does your realistic surplus actually amortise, at what interest, in how many years? We run that calculation before recommending anything.
Credit record consequences compared
Debt review: flagged from application until clearance certificate — commonly 5+ years of no new credit. Sequestration: insolvency listed until rehabilitation (application-based from ~4 years, automatic at 10) plus a further listing period, but rehabilitation removes the disability and rebuilding starts clean — no debts trailing you. Neither is ‘better for your record’ in the marketing sense; they’re different shapes of the same wilderness period.
Traps in both industries
Debt review traps: counsellors who under-negotiate and load fees, reviews that never end, and ‘debt review removal’ scams. Sequestration traps: friendly sequestrations engineered around statutory requirements (courts now scrutinise these hard), promises you’ll ‘lose nothing’, and applications priced without the trustee’s contribution risk explained. Anyone who answers before calculating is selling, not advising.
Exiting each
Debt review ends by clearance certificate (debts settled) or court order rescinding where you were never/no longer over-indebted. Sequestration ends by rehabilitation — automatic at 10 years or by application earlier with trustee support, full contribution paid, or composition accepted. Both exits are legal processes we run to restore full financial capacity.
Frequently asked questions
Will I lose my house in debt review?
No — that’s its core promise: assets are protected while you comply with the restructured plan. In sequestration, the home is typically sold unless equity is negligible or a family buy-back is structured.
Can I switch from debt review to sequestration?
Yes — over-indebtedness often deepens post-review. The review is dealt with in the surrender application; timing and disclosure matter.
Which is faster back to ‘normal’?
Arithmetic again: small debts — review may clear in 3–5 years. Deep debts — sequestration plus early rehabilitation (~4–5 years) commonly beats a 10-year review treadmill.
Are my retirement savings at risk?
Pension and retirement annuity funds are largely protected in both processes — one of the strongest reasons never to cash retirement funds to service doomed debt.
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