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D7 - Sequestration or Sanity: Our Financial Fork in the Road

  • Writer: Joe Debt
    Joe Debt
  • Oct 25
  • 6 min read

We've researched the options of debt consolidation and debt review and determined that these aren't good options for us - though it could be different for you. Before starting our journey of paying off a lot of expensive bad debt, we wouldn't be thorough if we didn't also research the option of personal sequestration. Our perception used to be that we could just wipe out a big chunk of our debt and start over. But we've since discovered it's much more complex than that.


A skier on an icy mountain slope - an analogy of personal sequestration being a slippery slope
A skier on an icy mountain slope - an analogy of personal sequestration being a slippery slope

At first, personal sequestration can seem like the ultimate solution - a legal lifeline to wipe the slate clean and start fresh. But, according to our research, you shouldn't be fooled by the promise of a “debt-free” future. In reality, sequestration is a complex legal process with long-term consequences that aren’t always clear at first glance.


From losing control over your assets to years of financial restrictions, it’s not the quick fix it appears to be. In this post, we’ll share what we’ve learned through our own research, so you can proceed with clarity, not just desperation.


Understanding Personal Sequestration in South Africa


What is Sequestration?


In summary, personal sequestration is a legal procedure in which you hand over your estate (all your possessions, excluding your bed, clothing, and certain personal items) to the court due to insolvency (when your liabilities - money you owe, is more in value than what you own - your assets, and you are unable to settle your debts). A trustee is assigned to liquidate your assets and repay your creditors. When granted, it means the individual is formally declared insolvent and their estate vests in the trustee (or curator) to realise assets and pay creditors. Barter McKellar+3South African Revenue Service+3DebtBusters+



When can it happen / who qualifies


Some of the requirements:

  • Must be a natural person (individual) - not a company. DebtBusters+1

  • Be at least 18, mentally capable of financial decisions. DebtBusters

  • Must show you are insolvent: either unable to pay debts as they become due or liabilities exceed assets. Insolvency Care - We can help...+1

  • For voluntary sequestration, you must prove to the court that sequestration will be advantageous to your creditors (i.e., they will get something from the estate) and that you have sufficient assets (or at least some estate) to cover costs of the process. DebtBusters+1

  • For compulsory sequestration, a creditor may apply for you to be sequestrated if you’ve committed an “act of insolvency” or your liabilities exceed your assets. VDM Law+1


The process (Voluntary Sequestration)


Here’s a simplified step-by-step:

  1. Consult an insolvency attorney to assess if this is the right path. DebtBusters+1

  2. Prepare a Statement of Affairs listing all assets, liabilities, creditors, income, expenses. Barter McKellar+1

  3. Publish a notice of intention (often in the Government Gazette and a local newspaper) declaring your intention to surrender the estate. This gives creditors the chance to oppose. Barter McKellar+1

  4. Lodge your application with the High Court (or relevant court) for the acceptance of surrender of your estate. The court must be satisfied you meet the prerequisites. VDM Law+1 Creditors should receive at least a minimum dividend - usually accepted as around 10 c to 20 c per rand owed, though courts may accept less if circumstances justify.

  5. Once the order is granted, your estate vests in a trustee; assets may be realised, debts are managed, creditors get paid according to law. Legal actions (like new credit or certain suits) may be suspended. DebtBusters+1

  6. After a period and meeting certain requirements, you may apply for rehabilitation, which restores some rights (though credit history will still reflect past insolvency). Wikipedia+1


What's written off (scrapped) and what's not written off by Personal Sequestration


Debt Type

Written Off?

Notes

Credit cards, loans, overdrafts

✅ Yes

Claimed via trustee

Retail store accounts

✅ Yes

Claimed via trustee

SARS normal tax

✅ Usually

Unless fraud/evasion

Maintenance (spouse/children)

❌ No

Continues after sequestration

Criminal fines / penalties

❌ No

Not dischargeable

Fraudulent debts

❌ No

Survive sequestration

Secured debts (bond, car)

⚠️ Partially

Asset sold; shortfall written off

Co-signed / surety debts

⚠️ Not for other party

Co-debtor remains liable


❌ No

New personal responsibility


How This Applies to Us


Here’s how personal sequestration affects our situation (summarized):


  • Personal sequestration can't be combined. To clear our debt, and if we do decide to sequestrate ourselves, we would need to do it individually - so two seperate sequestrations applications.

  • We are married out-of-community of property without accrual. This means that everything that I owned (my assets) before we got married, as well as whatever I bought with my own money during our marriage (this part is the "accrual" part) belongs to me and vice versa for my wife.

  • I don't currently own any assets worth mentioning - little to no value. My wife owns what I estimate to be worth about R100k - R150k when sold (second hand).

  • About half our total debt (refer to our debt scorecard here) belongs to me and the other half to my wife. Let's say about R230k each - at the time of writing this blog post.


Our Two Sequestration Scenarios


What it Would Mean For My Wife


Pros:

  • Applying for Sequestration: the legal cost is about R20,000.

  • She owes about R230,000, so the creditors (banks) would want at least R46,000 (20%).

  • She owns assets to the value of approximately R100,000 (resale value). They will sell the assets and pay the R100,000 to the creditors - the creditors should be happy as they will be getting a little more than 40% of what she owes them.

  • The whole thing costs R20,000 + R100,000 = R120,000. Total saving = R230,000 (owed) - R120,000 = R110,000.


Cons:

  • They come and take most of her belongings and sell them to pay the creditors

  • She's flagged as insolvent and won't be able to apply for credit for the next 4 or so years until rehabilitated.

  • Her accounts are all frozen and under the control of a Trustee until fully rehabilitated—about four years.


What it Means For Me


Pros:

  • Applying for Sequestration: the legal cost is about R20,000.

  • I owe about R230,000, so the creditors (banks) would want at least R46,000 (20%).

  • I don't own any assets. They won't be able to sell anything. I would need to come up with a payment plan (overseen by the appointed Trustee) for at least R46,000 (20% - to satisfy the creditors).

  • The whole thing costs at least R20,000 + R46,000 = R66,000. Total saving = R230,000 (owed) - R66,000 = R164,000 (at most).


Cons:

  • I'm flagged as insolvent and won't be able to apply for credit for the next 4 or so years until rehabilitated.

  • My accounts are all frozen and under the control of a Trustee until fully rehabilitated—about four years.


Conclusion - Should We Do It?


For us, just like Debt Consolidation and Debt Review/Counseling, and although there is some financial benefit to personal sequestration, we're just not convinced that this is a good option. It will be highly inconvenient in terms of the legal process of having to apply for sequestration, having our financial affairs controlled by a Trustee, having our assets seized and sold, and not being able to apply for credit, etc. Perhaps if the value of the debt was a lot more... then maybe!


We would love to hear from you - your own experience, or your opinions on the matter. Please use the comments section below.


Until then, take (financial) care!


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