PART 2
June 2013
DEBTOR DYING AFTER THE PETITION FOR BANKRUPTCY IS PRESENTED
54.38 Debtor dying after the presentation of bankruptcy petition – general
The legislation provides that, unless the court orders otherwise, the bankruptcy proceedings against an individual who dies after the petition has been presented will continue as if the individual were still alive, with some necessary modifications [note 1] [note 2]. Consequently, the order will be known as a bankruptcy order.
Where the debtor dies before the presentation of the petition the guidance in Part 1 should be followed.
54.39 Service of bankruptcy petition
Where the debtor has died after the presentation of the petition but before service, the court may order the petition to be served on the personal representative (see paragraph 54.55) or other person as the court thinks fit [note 3].
54.40 Provision of a statement of affairs – general responsibility
Where a bankruptcy order has been made and the debtor has died without first submitting a statement of affairs, the personal representative (see Part 3) or other person directed by the court is required to submit the statement of affairs in the debtor’s place [note 4].
Generally, this provision will only apply to cases made on a creditor’s petition as a statement of affairs is supplied with the petition in a case made on a debtor’s petition.
54.41 Provision of a statement of affairs and other information – practicalities
As soon as possible after it becomes apparent that a bankrupt has died without providing a statement of affairs, the official receiver should issue the statement of affairs forms [note 5] to the personal representative or other person (see paragraph 54.39) with a covering letter explaining their duty and requesting completion of the forms. The statement of affairs must be submitted within 56 days of the request, or such longer period prescribed by the court or the official receiver [note 6]. The official receiver should also request sight of the death certificate and a copy of the last will of the deceased bankrupt.
Due to the fact that the personal representative is often a relative or otherwise closely connected to the deceased, the official receiver should phrase his/her letters carefully so as to not cause undue distress on the individual. Depending on the circumstances, an introductory telephone call may be appropriate.
54.42 Preliminary information questionnaire
It will generally not be necessary for the official receiver to require the completion of a preliminary information questionnaire (PIQ) as many of the questions asked therein relate to information that will be contained in the statement of affairs.
If, having inspected the statement of affairs and other information provided by the personal representative, the official receiver considers completion of the PIQ is necessary, it may be issued to the personal representative.
In view of the need to deal sympathetically with a relative that is the personal representative of the deceased, it may be more appropriate for any PIQ to be completed at interview, or for matters to be dealt with in a narrative statement (see paragraph 54.43).
54.43 Interviewing the personal representative
The information contained within the statement of affairs and/or PIQ (see paragraph 54.42) should enable the official receiver to make a decision whether an interview with the personal representative is necessary. In reaching this decision, the official receiver should particularly take account of any recent trading activity by the deceased.
If the personal representative has not provided the required information by the date requested, he/she should be invited to attend for interview.
Depending on the complexity of the deceased’s affairs, a narrative statement may be sufficient for the official receiver’s purposes, with a PIQ used during the process of taking the statement as an aide memoir of questions to be asked.
54.44 Extent of the bankruptcy estate
The deceased bankrupt’s estate comprises the same property as that which comprises the bankrupt’s estate at the date the bankruptcy order is made [note 7] [note 8].
Where a debtor dies after the appointment of a trustee, any will made by the deceased pre-dating the order is invalid as all assets will have vested in the trustee.
54.45 Pension annuity and death benefit
A pension annuity (see paragraph 61.18) that is being paid to the bankrupt at the time of death may be claimed under an income payments agreement (see Chapter 31.7), as it would if the debtor were still alive, taking into account the reasonable domestic needs of the debtor’s family.
A death benefit under a pension policy would be excluded from the estate (see paragraph 61.24), but might be claimed as after-acquired property, if there were no beneficiary to the policy (see Chapter 31.8).
Where the debtor has a life policy that pays out on death it is usually the case that the policy will pay out to a defined beneficiary (the spouse, for example), in which case the bankruptcy estate would have no interest. Where there is no defined beneficiary, the proceeds of the life policy would be payable to the deceased estate, in which the bankruptcy estate has an interest.
Generally speaking, many policies of this type are now sold ‘back’ to the bankrupt (see paragraph 31.5.129). Where this has happened, the funds may only be claimed, from the deceased estate, as after-acquired property (see Chapter 31.8).
54.47 Disposal of property post-petition
Where property has been disposed of (whether by the bankrupt before he/she died, or some other person after) between the presentation of the petition and the vesting of the estate in the trustee the value of the lost property is recoverable (see Chapter 31.4B, Part 5), unless the disposal was with the permission of, or subsequently ratified by, the court, or was for value and without notice of the petition. A transfer of a property interest under the rules of survivorship would not be affected by these restrictions as there is no ‘transfer’ in these circumstances (see paragraph 54.65).
54.48 Individual insolvency register
A bankrupt’s death is one of the events that the official receiver is required to include on the individual insolvency register (see paragraphs 4.73 to 4.74) [note 9] [note 10]. The information contained in the register is drawn from ISCIS, so it is important that the date of death is entered onto ISCIS at the earliest opportunity.
54.49 Claim for funeral and testamentary expenses by personal representative
The official receiver, as trustee, must have regard to any claim by the personal representative (or similar) for reasonable funeral, testamentary and administrative expenses incurred [note 11], provided the estate has sufficient funds in hand and these claims have priority over the preferential debts [note 12] [note 13]. If the personal representative does not inform the official receiver, as trustee, of these expenses before a final dividend is declared, he/she may declare and distribute a dividend without regard to the claim for the expenses [note 14] (see Chapter 36A, Part 6).
54.50 Assessment of claimed funeral expenses
In assessing what are reasonable funeral expenses (see paragraph 54.49), the official receiver should have regard for the lifestyle and standing in the community of the debtor. It would, for example, be reasonable to proceed on the basis that the funeral expenses of a person of some standing might be higher than average.
54.51 Assessment of claimed testamentary expenses
Testamentary expenses are the expenses of obtaining probate; this being the exhibiting and proving of the will by the executor in the High Court. The original will is deposited at court and a copy sealed. The court then issues a certificate evidencing that it has been proved. This allows the executor, in the normal course, to administer the will. These functions are often carried out by a solicitor on behalf of the executor.
In assessing the claim, the official receiver should ask for a detailed bill of costs, or similar, including time and rate calculations where the stated expenses appear unreasonably high.
54.52 Payment of funeral expenses where policy available to cover expenses
In some cases an insurance policy that vests in the official receiver, as trustee, may become payable on the death of the bankrupt. In such a case, the funds would be payable to the estate (see paragraph 54.46), but would be subject to a claim by the personal representative (see paragraph 54.49).
It is possible that such a policy may pay out some years after the trustee has obtained his/her release as trustee of the bankrupt’s estate (see Chapter 37). Nevertheless, the personal representative will still have a claim for funeral expenses against the amount of money received by the official receiver, as trustee ex-officio.
In each case, the official receiver should charge the usual fees and also hold back an amount equal to any debit balance (written-off) on the estate before making a payment to the personal representative.
54.53 Discharge and suspension of discharge
The discharge provisions of Act (see Chapter 22) would apply normally to a debtor who dies after the presentation of the petition [note 15] [note 16] (see Chapter 22).
The provisions relating to suspension of discharge (see Chapter 13, Part 9) would only apply to the non-cooperation of the bankrupt (before death), and not to any non-cooperation of the personal representative (see paragraph 54.55).
54.54 Bankrupt subject to suspension of discharge before death
Where the bankrupt’s discharge from bankruptcy was suspended (see Chapter 13, Part 9) before, or without knowledge of, his/her death, the official receiver may apply to lift the suspension if the personal representative, or other person, is able to provide information (see paragraph 54.40) to allow for the conclusion of the administration of the estate.
[Back to Part 1 – Debtor dying prior to the presentation of a bankruptcy petition] [On to Part 3 – The personal representative]