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It may not be the first thing on our minds when a loved one passes away but dealing with an insolvent estate after a death can be emotive as well as complex.Call us: 0141 566 7038
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It may not be the first thing on our minds when a loved one passes away but dealing with an
insolvent estate after a death can be emotive as well as complex.
It is a common misconception that that a debt in written off after an individual passes away. This
is untrue as any debts need to be paid from the deceased estate before any beneficiaries receive
When an individual dies, no one is required to settle their debts unless the debts were in joint
names, such as a joint loan or overdraft. However, if the deceased individual had assets,
they are used to repay debts before beneficiaries can receive any inheritance. This
underpins the main role of an executor.
If the deceased person’s debts are greater than the total value of assets within the estate, the
estate is insolvent.
If correct rules and procedures are not followed, or mistakes are made, the person or people
administering the estate could be held personally liable.
Below we discuss what happens when an estate is bankrupt, who administers the estate of a
bankrupt person, and how Wylie & Bisset LLP can assist with any deceased estate queries.
When is an estate bankrupt?
Bankruptcy is the legal process that is followed when someone has become insolvency. The
Scottish term for bankruptcy is sequestration.
After someone passes away, their estate is insolvent when there is not enough money to pay off
If an executor is appointed and it is established the deceased estate is insolvent, then they have
an obligation to take steps to sequestrate the estate.
If there is no executor appointed, then anyone entitled to act as one can take steps to place the
estate into insolvency.
Using bankruptcy of a deceased estate as a useful tool to repay debt?
Under Section 14 (3) of the Bankruptcy (Scotland) Act 2016 , an executor or anyone entitled
to be appointed as an executor can apply to the Accountant in Bankruptcy for the bankruptcy
of the deceased estate. The application must be made no longer than 12 months after the
day in which the executor knew, or ought to have known, that the estate was insolvent and
likely to remain so.
This removes the need for formal confirmation and appointment of an executor. The
Accountant in Bankruptcy then processes the application to sequestrate the estate. The
estate funds can settle executor fees.
We have experience in dealing with insolvent deceased estates. Our team can assist with the
application and formal appointment as a Trustee.
Who administers the estate of a bankrupt person?
Once a person is declared bankrupt, their estate is sequestrated, and a Trustee is appointed.
The Trustee is legally entitled to administer the estate of the deceased.
Get in touch
Are you the executor of an insolvent estate? For an initial discussion about your position,
contact our in-house expert, Paul McDougall.