Voluntary sequestration is a legal process whereby you apply to court to have you officially declared bankrupt. The court appoints a trustee/curator of the estate and your assets are valuated. The curator then oversees the sale of assets on auction and distributes the income from the sale among the creditors. Legally, you stay sequestrated until you have been rehabilitated. If you do not apply for rehabilitation, you will stay sequestrated for a period of ten years.

Once sequestrated, you are debt-free and can thus restart your life without the concern for judgments, garnishee orders, and debt collector harassment.

What happens when you are married in community of property?

If you married without an antenuptial contract, you are married within community of property. This means that all the assets and liabilities of both spouses before and after the marriage are shared. You have one estate. If you enter voluntary sequestration, it affects all the assets in the marriage. There are no assets that just belong to you or your partner, and you thus need the consent of your spouse to apply for voluntary sequestration.

What happens if you are married with an antenuptial contract?

If you are married with an antenuptial contract, the assets are held in two separate estates. What belongs to your spouse is thus not part of the voluntary sequestration. This also applies if you have married out of community of property with accrual. The accrual system applies when you get divorced and thus does not have an effect on the voluntary sequestration.

You thus have two separate estates. However, Insolvency Act Section 21 applies. This means that you do not have to be married in the legal sense of the word to be in a marriage. You can have a husband or wife according to custom, or may have lived with someone as their husband or wife for several years. Though you do not have legal papers for it, it is still considered a spousal relationship. Your spouse is thus affected by voluntary sequestration and we recommend seeking our legal assistance to protect their assets.

Section 21 of the Insolvency Act states that the solvent spouse must be able to prove which assets belong to them. This is required to prevent a situation with voluntary sequestration where the insolvent party hides their assets by giving the impression that the assets belong to their solvent spouse. If the solvent spouse is unable to prove ownership, the assets form part of the insolvent estate. Indeed, until the solvent spouse can prove otherwise, the assets will form part of the voluntary sequestration.

If the solvent spouse can prove ownership of assets, the assets are not attached, provided the solvent party never signed surety for the insolvent party. In the latter instance, the assets of the solvent spouse also form part of the voluntary sequestration.

Seek legal guidance on how to protect your spouse’s assets if you are married out of community of property and how to go about if you are married in community of property and you want to apply for voluntary sequestration in South Africa.

Disclaimer: Information is relevant to the date of publishing and is not intended as any form of legal advice. Please call on our attorneys for legal guidance, rather than relying on the information herein to make decisions – December 2017.