A re-assessment of exempted assets in insolvency law : the case for a homestead exemption

Abstract

The Insolvency Act 34 of 1936 does not exempt the debtor’s home from execution in a manner similar to other assets such as income, bedding and household furniture. This means that the exempt assets under the Insolvency Act do not include a debtor’s home and the latter can be sold during sequestration proceedings. This dissertation argues that this position infringes various rights in the Constitution. In Jaftha v Schoeman; Van Rooyen v Stoltz 2005 (2) SA 140 (CC), the Constitutional Court dealt with the correlating position under the individual execution process. Section 26 of the Constitution, which guarantees the right to access to adequate housing, formed the basis of a successful challenge to the Constitutionality of the execution process. This case provided that courts must consider “all the relevant circumstances” in every situation when a creditor seeks to execute upon the residential property of an individual. Unfortunately, in sequestration proceedings where debtors find themselves in a predicament where they are incapable to pay their debts and risk losing their homesteads, the South African system offers little to no protection against homelessness. Against this background, this dissertation argues that there needs to be a re-assessment of the homestead inclusion in the insolvent estate. This re-assessment considers international law perspectives, the interests of children and any other dependants in the case of a debtor’s home being sold, as well as the position of creditors.