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The Effect of Insolvency on the Estates of Spouses

The conclusion of a marriage has far reaching effects on the patrimonial status of the individual estates of the spouses concluding such marriage.

It then follows that there are legislative provisions for spouses to choose the matrimonial property system they prefer to govern their marriage in appreciation of the consequences thereof.  

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Sequestration Married out of Community of Property

According to the Matrimonial Property Act 88 of 1984, marriage in community of property whereby parties’ own assets and liabilities between them in joint, undivided and equal shares; marriage out of community of property and community of profit and loss without the accrual system and the marriage out of community of property whereby community of profit and loss is retained, are the recognised matrimonial property systems in South Africa.

Where one of the spouses in a marriage becomes sequestrated, the system that governs their matrimonial property is important in the determination of consequences on the estate of the other spouse.

Marriage in community of property legally results in the spouses owning their respective estates in joint, indivisible shares.

The individual and separate estates of the parties cease to exist, and a legally recognised joint and indivisible status becomes effective.

The consequence of such a situation is that as joint co-owners in the common estate, if either of the spouses is sequestrated it automatically affects the other spouse as well as they have a share in the indivisible joint estate. It is irrelevant that the spouses micro-managed their finances separately in the marriage.

Both spouses will be sequestrated automatically at the declaration of insolvency of either of them.

In the event that the spouses married in community of property then opt to change their matrimonial property regime, the creditors must be notified as affected parties.

Parties that are married out of community of property retain their separate estates and the insolvency of the other spouse does not affect the status and estate of the other spouse generally.

However, if the solvent spouse signed as surety for the insolvent spouse, the solvent spouse will be called upon to contribute to settling the claims of the creditors where such surety was signed for.

It also follows that in the Application for Sequestration of the insolvent spouse, the solvent spouse will also be served with the notice as Second Respondent.

Sequestration Without Assets

Where spouses are married out of community of property with the inclusion of the accrual system, the question of accrual only vests upon termination of the marriage.

Accrual is the growth of the individual estates of the spouses during the marriage and this is only where either spouse can lay a claim on.

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Accrual is only effective between the spouses themselves and does not affect the rights of creditors. Creditors therefore may not enforce their rights on any accrual, so the declaration of insolvency on the one spouse does not affect the status of the other spouse.

It is imperative to seek legal assistance and guidance before entering into a marriage contract so as to safeguard your patrimonial and other related interests.



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