Insolvent estates and bankrupt beneficiaries
Insolvent estates and bankrupt beneficiaries

The following Wills & Probate guidance note provides comprehensive and up to date legal information covering:

  • Insolvent estates and bankrupt beneficiaries
  • Insolvent estates
  • Legislation
  • Outline of procedure
  • Fees
  • Joint property
  • Deceased Lloyd's Names
  • Bankrupt beneficiaries

Insolvent estates

An estate is insolvent if, when realised, it will be insufficient to meet in full the debts and other liabilities to which it is subject. An estate is not insolvent if debts and liabilities can be settled even if none of the legacies can be paid.

Legislation

The legislation governing the administration of an insolvent estate is the Administration of Insolvent Estates of Deceased Persons Order 1986 (AIEDPO 1986).

Outline of procedure

Insolvency may emerge during the course of administration after a grant of representation has been made or be obvious from the start. If there is doubt, the estate should be administered as if insolvent. If the estate appears to be insolvent, there are three possibilities:

  1. administration by the personal representatives (PRs) under the directions of the court pursuant to an administration order (Part 64 of the Civil Procedure Rules (CPR)) (note that the courts are not anxious to undertake such a role)

  2. administration in bankruptcy following an insolvency administration order made by the bankruptcy court. Creditors or PRs may petition. In either case the order vests the estate in the Official Receiver. Subsequently, a trustee in bankruptcy will be appointed

  3. administration by the PRs without application to the court (note that PRs do not need to be qualified insolvency practitioners; they must administer

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