Adebtor who could not pay his/her debt under Roman law, could be sold into slavery.  In the worst case, the person could be cut into pieces and each creditor given a piece, so that one is not prejudiced over the other.  Very glad those days are over…


Fortunately for us in modern day, the law changed over time as society became more civilized and debtors could not be sold into slavery any longer, but, now they could be imprisoned for not paying their debt.  As late as 1994 in South Africa, debtors could still be jailed for not paying their debt.  Many people were indeed locked up for this, but sadly, the term of incarceration did not wipe out the debt! When the person was released from jail, he/she still had to pay the debt. This was an untenable situation because if you are in jail, you cannot earn an income which means you can’t pay your debt.

Fortunately in 1994 when the new government came into power, legislation was almost immediately changed so that a person cannot be locked up for not paying his/her debt any longer. Phew! Aren’t we all relieved about that!


Eventually, in the second century, creditors could take all the debtor’s possessions and sell it and then divide the proceeds amongst the creditors. To this day, this can still happen because a creditor can obtain a Warrant for Execution to attach the assets of the debtor and sell it on an auction (execution sale).  The person can also be sequestrated by a creditor so that all the assets can be sold and the proceeds divided amongst the creditors.


In the second century, when there was a sale of the debtor’s assets, the person person who made an offer for the largest dividend on the creditors’ claims, could buy all the assets.   In later times a curator was appointed by the creditors to attend to the sale of the property.


During about 48 BC, a debtor could surrender his estate to his creditors to be sold. This was the earliest form as sequestration as we know it. The debtor who so surrendered his/her estate, could not be arrested or imprisoned or sold in slavery. Instead, all his/her assets were sold to pay for his/her debt.  The debtor could however keep some of the money for his/her own maintenance.



As society got more sophisticated during the 15th century, insolvency started to develop in a better way.  A person could declare him/herself insolvent, but only if he/she could prove that his/her inability to pay his/her debt was not caused by him/herself but because of circumstances beyond his/her control.


Nowadays a curator is appointed to wind up the insolvent estate, but those days the local Magistrate usually administered the debtor’s estate.  In 1803 in the Cape in South Africa, the “Desolate Boedelkamers” were established to administer insolvent estates.  Eventually this was abolished and a sequestrator was appointed instead.


In 1936, the Insolvency Act was passed and this Act replaced all existing law on Insolvency to regulate the process when a person is insolvent and cannot pay his/her debt.  Currently, insolvency remains regulated by the Insolvent Act.  In terms of this Act, a person can surrender his/her estate by giving all his/her assets to be sold by a curator and the proceeds divided amongst creditors. A person can only sequestrate if there is a benefit to his/her creditors.  This means that there must be enough assets or money to be divided amongst the creditors.  The creditors are then paid in a certain order.  That which a creditor does not get, must be written off.


The reason for the existence of insolvency is to keep the economy going, because if it did not exist, everybody all over the world who cannot pay there debt, cannot take part in the economy ever again and that way the economy will shrink.  The Insolvency Act has not changed much since 1936 and insolvency still works pretty much in the same way since then.