Let’s start with the basics, what does it mean to be insolvent?
Let us start with the basics, what does it mean to be “insolvent? Insolvency is a financial position where a person is over-indebted and therefore unable to meet their financial obligations when they become due. Thus, for a person to be considered an “insolvent,” this means that their liabilities exceed their assets. In South Africa, when a person is declared insolvent, their estate goes through a legal process called sequestration. During sequestration, the insolvent surrenders his estate to the Master of the court or trustee appointed by the Master. The responsibility of the trustee is then to seize control of the assets available in the insolvent estate, manage them, liquidate them and ultimately pay off the insolvent’s creditors to protect legal integrity. (Please note that throughout this blog the words “debtor” and “insolvent” are used interchangeably).
Types of sequestration
There are three types of types of sequestration, firstly voluntary surrender. This entails the insolvent himself, making an ex parte application to the court so that his estate may be sequestrated as a form of debt relief. Among other things, this process requires that the debtor prove that the sequestration of his estate will be to the advantage of creditors. The second type of sequestration is referred to as compulsory sequestration. This occurs where the debtor’s creditors make an application to the court to have the insolvent’s estate sequestrated because the insolvent cannot pay off their debts or commits an act of insolvency. The final type is friendly sequestration, this is where a “friendly” creditor, such as the debtor’s friend or family member applies to sequestrate the insolvent’s estate, often for the insolvent’s benefit, however this type is particularly criticised by the courts.
Now that you understand the basics, let’s get into the tea and what this has to do with love and cohabitation
Section 21 of the Insolvency Act 24 of 1936 provides, that when a person’s estate is sequestrated, the law doesn’t just look at their own bank account. Instead, the assets and property of the solvent spouse automatically “vests” in the insolvent estate (automatically falls under control of the court-appointed trustee). This means that even if you are the “solvent” partner with no debt of your own, your car, your house, and your savings are legally treated as if they belong to the insolvent estate until you can prove otherwise. And the kicker? Well, section 21 applies even if you are married to your partner out of community of property, meaning you signed an ante-nuptial contract to avoid the automatic merger of your estates upon marriage. Oh, and there’s more…the term “spouse” under this provision of the Insolvency Act also applies to persons who are unmarried, but cohabitating. The core goal of this harsh rule is to stop couples from “colluding” by hiding the debtor’s assets in the partner’s name right before the creditors come knocking. This all sounds a little scary, but it is worth noting that section 21 leads to temporary vesting of the solvent spouse’s assets.
How can I get my stuff back?
Section 21(2) is the part of the Act that gives you a way to get your property back. It essentially lists the “rules of evidence” you must meet to convince a trustee to release your assets. To save your belongings, you must prove that they fall into specific categories. Perhaps you owned the property before the relationship even started, you inherited it, you have a valid title deed, or you bought it with your own salary and can prove the paper trail. It also protects assets acquired through a legal marriage contract or those bought with the proceeds of other “safe” property. In short, Section 21(2) shifts the burden of proof onto you, the trustee is legally required to release your assets, but only after you’ve provided the receipts and bank statements to prove they are truly yours and not just hidden wealth from your partner. However, the issue with this “get out of jail free” card provided for under section 21(2), who actually keeps a paper trail of all their transactions, valid title deeds, financial statements, the lot? Nobody could have foreseen that their partner was going to go insolvent after say 10 years of being together. Also, why does this provision only apply to solvent spouses? Could the insolvent spouse not collude with concomitant third parties, like siblings or business partners? Why are they excluded? The severe burden of proof imposed on the solvent spouse by Section 21 is undeniably harsh, especially when you consider that the Insolvency Act was enacted in 1936, a time when women were often viewed merely as extensions of their husbands. Back then, a wife was seen as a convenient “haven” for an insolvent man to hide assets from creditors, a furtherance of his financial failures.
A relic of 1930s stereotypes
In today’s world, this harsh burden feels like a relic of the past, an archaic notion that does not consider contemporary debtors. Women’s financial and economic statuses have completely transformed since the 1930s, yet the law still treats the solvent partner with immediate suspicion. It’s also worth noting how much the definition of “spouse” has stretched to keep up with the times. While the original 1936 text is “silent” on same-sex marriages and uses very traditional language, referring mostly to “wives” and “husbands”, modern South African law and the Civil Union Act have bridged that gap. Today, Section 21 applies to everyone equally, whether you are in a traditional marriage, a civil union, or a long-term same-sex partnership. The law has evolved to be more inclusive, but it hasn’t necessarily become more lenient. Whether you’re in a modern power-couple dynamic or a long-term cohabitation, the 1936 rules still apply, if your partner’s ship sinks, the law is going to take a very close look at your lifeboat too.
ABOUT THE AUTHOR
Reshoketsoe Reneilwe Modiba, known as Shoki, is an LLB graduate and an LLM candidate in Mercantile Law at the University of Pretoria, specialising in banking law, insolvency law and transnational business law.
She has experience as a content creator and marketing intern at the Department of Library Services at the University of Pretoria, where her responsibilities included creating engaging reels, static posts and stories to promote library services and communicate important information to students across various social media platforms.
Shoki has participated in several mentorship programmes, including being a mentee in the 2024 For Women in Law intake, where she attended all contact and online sessions and actively contributed in meetings with mentors and guest mentors, while also supporting fellow mentees. She is also a mentee in the 2025 South African Chapter of the International Association of Women Judges (SAC-IAWJ) programme, where she engaged in regular contact sessions, court observations, webinars and reflection sessions. Through these experiences, she developed skills in legal writing, research and drafting, while gaining insight into court hierarchy, legal ethics and career development.
Outside of her academic pursuits, Shoki is a creative at heart and enjoys writing poetry, short stories and drawing.