Let’s quickly explain what it means to be married in Community of Property (COP):

Firstly, this is the most affordable way to get married (because you won’t need to get an antenuptial contract drawn up by a lawyer) and it’s also the most popular choice for South Africans. By getting married in this way you might unintentionally be setting yourself up for a big surprise down the line.

If you don’t sign an antenuptial contract before you say, ‘I do’, then you’ll automatically be married in community of property. It’s that straight forward.

And that’s cool, if you understand the consequences of your decision…

According to South African law, when two people decide to tie the knot in COP, what everyone owns and owes (debts and other liabilities) before they are married becomes shared in a joint Estate.

It’s no longer “This is mine and that is yours.” When it comes to your finances, it’s all “ours” including any debt you bring to the party.

Back to the legal stuff for second.

What do we mean by an Estate?

An Estate is everything that makes up the net worth of a person, including all land, property, possessions, financial securities, cash in the bank, and other assets that he or she owns or has a direct interest in.

Here are some examples to show the impact of being married in COP has:

  • If one spouse comes into the marriage with a lot of debt (it may be student loans, credit card debt etc) then both spouses will be liable for that debt.
  • If one spouse runs their own business and they need to apply for an overdraft and their business ends up not being able to pay back the overdraft, then the bank can claim the money from the couple’s joint Estate.
  • Both spouses may need to sign when any contracts are taken out (for example when taking out a cellphone contract).
  • If one spouse goes insolvent, then both spouses will be declared insolvent.

Now that you understand what it means to be married in COP, let’s turn our discussion to the implications it has when you apply for Debt Review.

What is Debt Review?

Debt Review (also often referred to as Debt Counselling) is a legal process every over-indebted South African qualifies for. Unfortunately, not too many people know this lifeline exists and as a result they continue to struggle to keep their head above water.

Once you are in the Debt Review process you are protected from creditors and you can commit to a brand-new debt repayment plan which suits your budget and provides you with some room to breathe again.

But if you are married in Community of Property, how will this impact your application for Debt Review?

Both spouses will have to apply for Debt Review, even though one spouse isn’t over-indebted. You are both responsible for the repayment of the debt because you are both legally liable for the debt.

How will this impact things for the partner who isn’t over-indebted?

They will not be able to apply for any credit while under Debt Review, and this can be highly problematic.

Here is a quick example to better illustrate the point we are trying to make.

John is married to Zanele. When they decided to wed 10 years ago, they didn’t think it was necessary to investigate a marriage contract. A COP arrangement seemed reasonable even though John had started a small business and was already taking out loans to support his dream of being his own boss.

Fast-forward 10 years and the wheels have started coming off (financially that is). John’s business hasn’t been able to survive the tough economic times and that has meant John has had to borrow more money than he can afford to repay.

John decides that he needs to enter Debt Review so he can re-negotiate the terms of his current credit agreements.

Just one problem.

It will need to be a joint Debt Review application even though Zanele doesn’t owe a cent to any creditors.

That means during the 5-year period it will take John to repay his debt, Zanele will also not be able to apply for any credit.

Can you see how a simple decision 10-years ago has caused major ramifications today?

If you are considering getting married, consider how you want to get married.

And if you are struggling with Debt, consider Debt Review as a legal option to reduce your monthly repayments.

Until next time.

The MoneyShop Team