Nicolette Dirk,finance writer, justmoney.co.za
Economic Freedom Fighter leader, Julius Malema, fought his own economic fight in court today when the sequestration case against him was postponed.
According to reports the former ANC Youth League leader owes Sars more than R16 million after he failed to submit tax returns between 2006 and 2010.
Four years ago Sars notified him about his outstanding tax returns and according to their reports it took him 18 months to file these returns.
DebtBusters CEO, Ian Wason, said a sequestration would not be a problem for Malema if hasn’t hidden any assets. But a sequestration process includes an investigation into all assets and would also reveal the ones he might be hiding from Sars.
Who would sequestration work for?
A report in the Mail and Guardian stated that Sars wanted Malema to be declared insolvent on the basis that he won't be able to pay his debts, and that his creditors are at a disadvantage because they are losing money.
A sequestration would mean that Malema won’t be allowed to incur any debt for a period of four to five years. He would also have an appointed trustee to manage his debt for the same period.
Wason said the main problem with sequestration is that it is not a financially feasible option for people already knee-deep in debt and without any assets.
“For a sequestration case, lawyers usually want R20 000 cash up front. Credit providers will also only agree to it if you have 12c for every rand you owe them,” said Wason.
Many of DebtBusters clients seek help when they have no assets and their finances are in the red. They would therefore unlikely have 12c for every rand they are in arrears.
“If they have any sustainable income, we rather advise clients to opt for debt counselling. We will be able to arrange discounts with credit providers to repay the debt owed and when it is paid off they are free to carry on with their lives,” said Wason.
When the sequestration period is over after four to five years, you will still have to say that you were declared insolvent if you apply for credit.
“This means you could be turned down for credit. A sequestration will haunt you even after the stipulated period,” said Wason.