Voluntary Surrender vs. Compulsory Sequestration: Understanding the Difference

Jul 17, 2023 | , , , , | News

When an individual is unable to pay his/her debt, he/she may consider sequestration. Sequestration is an application made to the High Court, requesting an order that declares the estate of an individual as insolvent. There are two types of sequestration: voluntary surrender and compulsory sequestration. While both options can provide relief from debt, they differ in terms of the process, consequences, and benefits. In this article, we will explore the differences between voluntary surrender and compulsory sequestration.


Voluntary surrender occurs when an individual willingly declares that his/her liabilities exceed his/her assets, and makes an application to place him/herself under an order for sequestration. One can apply for voluntary surrender at any stage. 

An individual who wants to pursue voluntary surrender will depose to an affidavit setting out the reasons why he/ she claims to be insolvent. Once the affidavit is attested to, the application will be issued at Court and a hearing date will be assigned. If the Court is in agreement with the application a provisional order (Rule Nisi) will be issued at the first hearing date. The matter will be postponed for a short period, allowing notice to be given to all creditors. Should no opposition be raised to the application on or before the return date, the order will be finalized, and the individual will receive an order declaring his/ her estate to be sequestrated. 

This means that the individual surrenders his/her assets and liabilities to the Master of the High Court, who in turn appoints a trustee to manage the estate. The trustee bears the responsibility of selling the assets and distributing the proceeds amongst creditors. 

By voluntarily surrendering one’s insolvent estate, you essentially prevent/ avoid the indignity of being forcefully sequestrated by one’s creditor(s), and you also retain some control over the process, in that you are entitled to choose the trustee who will be authorized to manage your estate.  


Compulsory sequestration, on the other hand, is where an individual is declared insolvent by Court, based on an application brought by a creditor of the individual. The application motivates the creditor’s belief that the individual is unable to pay his/her debts as and when they become due, that the individual has committed an act of insolvency as set out in the Insolvency Act no. 24 of 1936, and for the most part that the individual’s liabilities exceed his/her assets. In this instance, the individual will not be in the driving seat of the application. He/she will rather be playing defense (the respondent) and will have an opportunity to oppose the application prior to the Rule Nisi being granted, and again thereafter to make a final case and produce sufficient compelling evidence that the estate is in fact solvent. 

Once the Court finds in favor of the applicant the estate is sequestrated, and a trustee is appointed to administer the estate and the selling of the assets to pay the creditor(s). Compulsory sequestration may hold more severe consequences, such as restrictions on future credit and the loss of certain rights. 

Deciding between voluntary surrender and compulsory sequestration can be a difficult decision. It is important to consider the benefits and consequences of each option prior to making a decision. While both options can provide relief from debt, they differ in terms of the process, consequences, and benefits. 

If you are considering placing yourself under sequestration or even thinking about taking the next step against a debtor who owes you more than just a few rands, you would be wise to seek the advice of a qualified and trusted legal representative practicing in this specialized field of law, to assist you in making an informed decision.

The content does not constitute legal advice, are not intended to be a substitute for legal advice and should not be relied upon as such. Kindly contact us on info@cklaw.co.za or 021 556 9864 to speak to one of our attorneys.


Zahnri Griebenow

Zahnri Griebenow

Zahnri joined CK as an associate in April 2023.

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