Q&As

In relation to an insolvent estate, where there are no secured creditors, what is the general order of payment of debts; what are preferential debts and what are ordinary debts? To what extent will the debts abate according to value? Also, how do I pay the creditors if the estate is insolvent?

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Produced in partnership with Chris Bryden of 4 King’s Bench Walk
Published on LexisPSL on 15/04/2016

The following Private Client Q&A produced in partnership with Chris Bryden of 4 King’s Bench Walk provides comprehensive and up to date legal information covering:

  • In relation to an insolvent estate, where there are no secured creditors, what is the general order of payment of debts; what are preferential debts and what are ordinary debts? To what extent will the debts abate according to value? Also, how do I pay the creditors if the estate is insolvent?

In relation to an insolvent estate, where there are no secured creditors, what is the general order of payment of debts; what are preferential debts and what are ordinary debts? To what extent will the debts abate according to value? Also, how do I pay the creditors if the estate is insolvent?

The duty of an administrator or executor is, in summary, to collect in all of the assets of the deceased, settle the liabilities, pay specific legacies and then deal with the residuary estate in the manner directed by the Will or in the absence of a Will, as required by the intestacy rules. However, where the estate is insolvent, meaning that its liabilities exceed its assets, there will be no residuary estate and specific pecuniary legacies will not be able to be made. In such circumstances, the Will does not apply, and the estate must be administered in accordance with the provisions of the Administration of Insolvent Estates of Deceased Persons Order 1986 (the 1986 Order) and section 421

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