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Marriage and Debt in South Africa

If you are in a relationship, you simply must make the time to have a truthful conversation about your debt, your credit report and your overall view on money, especially if you are planning on tying the knot. Finding financial skeletons in the closet once you are married, is one of the worst things that can happen.

  Ijaaz Achmat, from Lynn Swartz Attorneys  – pointed out that a  good credit score is extremely important in acquiring various loans, such as home loans, vehicle finance etc.

“Many couples find themselves in the unfortunate situation where they do not qualify for loans, due to the one spouse carrying bad debt. Therefore, choosing the correct marital regime is of utmost importance”

Achmat went on to say that financial stress due to bad debt,  is one of the main contributing factors to divorce. He went on to outline the impact of debt on certain marital regimes in South Africa.

Marriage in Community of Property (Default System)

In the absence of a marital contract being entered into, your marriage will automatically be deemed –  in community of property, as this is the default system of the country.  This means that:

  • All your assets and liabilities (excluding any inheritances) will be merged with those of your spouse to form a single joint marital estate to which you are each 50% owners. All debt – including that which existed before the date of marriage – forms part of the communal estate, and the parties to the marriage become jointly liable for the debt. Claiming that you had no knowledge of your spouses debt is not a defence and cannot be used as a remedy at any stage.
  • This type of marriage contract is unfair to the spouse who has less or no debt because, as a consequence of the marriage, they effectively assume responsibility for 50% of all their spouse’s debt even if they were not aware that it existed.
  • Further, the actions of each spouse in a community of property marriage are contractually binding on the other spouse. If one spouse declares insolvency, both spouses will automatically be sequestrated.
  • Generally speaking, where such a marriage is dissolved through divorce, each spouse is entitled to a 50% share of the joint estate.

Marriage out of community of property

Including the Accrual System

Set up in terms of an ante-nuptial contract – which is a contract intended to set out the financial consequences of the marriage – the accrual system involves each spouse maintaining their own separate estate during the marriage.  The idea behind an ante -nuptial contract is to allow couples to customise their marriage contract according to their needs. Being married in community of property with the accrual system basically means that:

  • On dissolution of the marriage (through either death or divorce), each spouse shares equally in the value of the two estates to the extent that they grew (or decreased) during the marriage.
  • Any debt incurred by either spouse prior to the date of marriage is excluded from the accrual.
  • Any debt incurred during the marriage is taken into account when determining the accrual when the marriage is dissolved, although each spouse remains responsible for their own debt.
  • The estate of each spouse remains completely separate up until the date of divorce or the death of the first-dying spouse, at which point the accrual will come into play.

 Excluding the Accrual System

Completely separate estates, both during and at the dissolution of the marriage is what best describes  a marriage that excludes the accrual system. With this marital regime, you will need to expressly exclude it from your ante-nuptial contract to ensure that the accrual system does not apply.

  • No sharing of assets will take place.
  • Further, any debt incurred before or during the marriage remains the responsibility of the spouse who incurred the debt, and the other spouse cannot be held liable for any such debt. If one spouse is declared insolvent and is sequestrated, the other spouse’s estate cannot be touched by the insolvent spouse’s creditors.
  • This ‘what’s mine is mine, what’s yours is yours’ approach can be unfair, particularly in circumstances where one spouse stays at home to raise children while the other pursues their career and amasses personal wealth

It is important to note that religious marriages are treated as out of community of property without the accrual system.

Every couple’s situation is different, and it is always advisable to consult with an attorney about your  marriage contract to ensure that both parties are adequately protected going forwards. Rather be safe than sorry!

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