Before 1995, it was still possible to be imprisoned for non-payment of debts. Back in the day, if a debtor was not able to pay their debts, the debtor was considered a criminal and treated as such. However, it is no longer legal to imprison someone for unpaid debt, except for debt owed to SARS, but that is another issue. Insolvency has been seen by many as complete failure to manage one’s financial affairs correctly.

Here is the truth: although in some instances, people reach the state of insolvency because of poor finance management, thousands of South Africans are now so caught up in the credit cycle that insolvency is almost eminent for them. Rising living costs, high inflation rates, economic uncertainty, and then the pressure to provide for one’s family according to the acceptable standards of society are among the reasons people reach the state of insolvency.

There are other reasons as well, such as unexpected medical expenses, funeral costs, vehicle breakdown, job losses, outstanding taxes, wrong investment choices, becoming a victim to swindlers, and more. Whatever the reason for getting to the state where one’s liabilities far-exceed one’s assets, the way one deals with insolvency is important.


If you are unable to pay your debt and living costs, have already cut back on all spending, and have taken as many steps as you can to reduce your debt, but are still in financial trouble, you may very well qualify for voluntary sequestration. The latter is a legal process whereby you apply to court to be declared bankrupt.

The court will assess whether you are indeed insolvent according to the requirements of the Insolvency Act, and whether sequestration will provide for the minimum benefit to the creditors. The sequestration must also provide for sufficient funds to pay for the legal process, and the trustee’s fees and administration costs. If you do qualify, your estate will be surrendered, and a trustee will be appointed to oversee the sale of assets by means of auction,

The trustee will manage the distribution of the benefits to the creditors according to the regulations of the Insolvency Act. Once the first liquidation account has been submitted to the Master, you can apply for rehabilitation, provided all requirements have been met. Please note that specific timeframes apply to rehabilitation applications.


True, your immovable property will form part of the surrendered estate, and you risk losing many of your assets in the process. However, you will have enough time to find a new abode, and the process will be handled discreetly. Your employer will not be notified, and you will still be able to open a savings account. The most important benefit of voluntary sequestration is that you will be debt-free. It will enable you to use the money you receive monthly to build up a new financial estate. It will make it possible to sleep at night without constantly being concerned about debt. You can save up for rehabilitation, and once rehabilitated, will be able to enter into credit agreements without the permission of a trustee.

Your creditors must immediately stop with harassment, and must deal with the insolvency attorneys. They cannot make demands for payments, as the trustee will be in control of the surrendered estate. You can thus live your life without constant harassment from creditors.


Perhaps the many misconceptions about insolvency have kept you from considering voluntary sequestration as a means of dealing with mounting debt. We briefly address some of the misconceptions below.

Unlike what you may have been told, you will not be left with just the clothes on your back. The insolvency attorneys can negotiate for the furniture to be written up, but not removed from your home. You can then buy back the furniture at the low auction price. You will not lose your firearm, as the firearm regulations make it difficult for the trustee to take possession, store, and sell the firearm. As such, it will be written up, but not removed. You will also be able to buy it back at a very low price.

Your children’s toys will not form part of the estate. If someone has thus told you that your children’s cycles and other assets will be lost in the process, you can rest assured that it is not true.

Rather than relying on hearsay information, ask our insolvency attorneys about the voluntary sequestration process, benefits and disadvantages, the rehabilitation process, and implications of sequestration.

Disclaimer: This article is for informational purposes only and does not constitute legal advice. Call on our attorneys for legal advice, rather than relying on the information herein to make any decisions. The information is relevant to the date of publishing.