Effect of the debtor's death on an insolvency process
Produced in partnership with David Nicholls of Landmark Chambers
Effect of the debtor's death on an insolvency process

The following Restructuring & Insolvency guidance note Produced in partnership with David Nicholls of Landmark Chambers provides comprehensive and up to date legal information covering:

  • Effect of the debtor's death on an insolvency process
  • What happens when a debtor dies?
  • What should happen to the insolvent estate?
  • What are the advantages and disadvantages of each method of administering an insolvent estate?
  • What happens where a debtor dies after a bankruptcy petition has been presented?
  • What happens where a debtor dies after the making of a bankruptcy order?
  • What happens to an individual voluntary arrangement (IVA) where the debtor dies?

What happens when a debtor dies?

A person may die insolvent. Their estate will be insolvent where its value is insufficient to meet all the debts and liabilities in full. In those circumstances, the administration of the estate is governed by the Administration of Insolvent Estates of Deceased Persons Order 1986, SI 1986/1999 (DPO 1986). The DPO 1986, SI 1986/1999 applies to the estates of those who die insolvent, including those who die after a bankruptcy petition has been presented. Its principal effect is to modify the Insolvency Act 1986 (IA 1986).

What should happen to the insolvent estate?

The insolvent estate must be administered in one of three ways:

  1. by the personal representatives (PRs)

  2. pursuant to an administration action

  3. pursuant to an insolvency administration order

Each of these are considered below.

Administration by the personal representatives

Administration by PRs takes place out of court and out of bankruptcy. But the PRs must comply with the law of bankruptcy when dealing with the assets of the estate in relation to the rights of secured and unsecured creditors, proof of debts, the valuation of future and contingent liabilities, the priority of debts and other payments. The PRs do not have to be qualified insolvency practitioners, but they will have to obtain a grant of probate or letters of administration in the