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Rehabilitation of an Insolvent Individual

When a person is sequestered by a High Court order, it can have numerous detrimental impacts on their personal and financial freedom. The purpose of sequestration is to repay debts, but it can have a significant impact on an individual's ability to transact and start over. 

The Insolvency Act of 1936 (known as "the Act") provides a way for a sequestered person to be rehabilitated, allowing them to move forward with their life without being weighed down by the designation of insolvency. However, this rehabilitation is only possible under specific conditions outlined in the act.

The outcome of rehabilitation can be characterized as follows:

1.    Termination of sequestration proceedings
2.    Cancellation of all debts owed by the insolvent individual.
3.    Release from any limitations imposed by the sequestration order.

It's crucial to understand that the granting of rehabilitation is at the discretion of the court and may come with conditions attached. These conditions can influence the results outlined above.

Types of Rehabilitation 

Automatic Rehabilitation 

A person who has been declared insolvent can either be rehabilitated automatically or through a court order. 

According to Section 127A of the Act, automatic rehabilitation occurs after a 10-year period from the date the provisional sequestration order was issued. 

This timeline could be prolonged if a party with a legitimate interest makes a formal request to the High Court, demonstrating adequate reasons for the extension.

Court-Ordered Rehabilitation

According to the Act, an individual who has been declared insolvent has the option to seek rehabilitation through a court order. 

It's vital to keep in mind that the application for rehabilitation must be filed in the same division of the High Court where the sequestration order was originally granted. This provision is available in various circumstances.