When personal debt becomes too overwhelming to manage, South African law offers a structured process known as voluntary sequestration. This legal route falls under the Insolvency Act 24 of 1936, and it’s designed to protect both the individual and their creditors when liabilities exceed assets.
This article explains what personal insolvency means, how the process works, and what implications it may have on your future.
🧠 What Is Personal Insolvency?
Insolvency occurs when an individual is unable to pay their debts and their total liabilities exceed their assets. Voluntary sequestration is a legal process that allows a person to apply to the High Court to be declared insolvent.
Once sequestration is granted:
- Your estate is surrendered to the court.
- A trustee is appointed to manage asset distribution.
- Creditors are paid proportionally from available assets.
- You receive protection from further legal action.
This offers individuals a chance to reorganise their financial affairs while satisfying creditors through an orderly legal framework.
📉 Signs That You May Be Insolvent
The following are common indicators:
- You’re relying on credit for essentials like groceries and transport.
- Garnishee orders or judgements have been issued against you.
- You’ve received a nulla bona from the sheriff (no attachable assets).
- Debt repayments consume more than 40% of your monthly income.
- Debt review or administration has failed to resolve your situation.
👥 Marriage and Insolvency: What You Should Know
Your marital status affects how your estate is treated:
- In community of property: You and your spouse must apply jointly.
- Out of community of property: Only your estate is impacted—but documentation proving asset separation is essential.
These distinctions are important when preparing court documents and calculating the surrender value of your estate.
🧭 The Sequestration Process in a Nutshell
- Financial Assessment: An insolvency practitioner reviews your debt, income, and assets to determine feasibility.
- Notice of Intention: A legal notice is published to inform creditors.
- Court Application: A formal application is submitted to the High Court.
- Appointment of Trustee: Once granted, a trustee manages asset distribution.
- Rehabilitation: You may apply after 4 years or automatically be rehabilitated after 10 years if no objection is lodged.
🛡️ Legal Protections and Limitations
Benefits of sequestration include:
- Protection from legal actions by creditors.
- A structured method to satisfy creditor claims.
- A clean slate to rebuild financial stability.
However, certain limitations apply:
- You cannot incur new debt or operate a business without permission.
- You lose control over your assets until rehabilitation.
- Assets may include inheritance received during insolvency.
📚 Further Reading and Legal Resources
- Insolvency Act 24 of 1936 (South African Government)
- South African Revenue Service – Personal Insolvency and Tax
- Legal Aid SA – Debt and Sequestration
- Justice.gov.za – High Court Process
📞 For more information about personal insolvency in South Africa or wish to explore whether it may be appropriate in your circumstances, you can contact Insolvency Care or reach out via WhatsApp at 073 071 3809 for a confidential discussion with a registered consultant.
Disclaimer: The article is for informative purposes only. It does not serve as legal advice, nor is it intended as such. Please speak to one of our panel attorneys before relying solely on the information herein to make any decisions.