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April 2005
Where a deceased debtor dies after the presentation of a bankruptcy petition, the AIEDPO86 provides that unless the court orders otherwise the proceedings will continue as conventional bankruptcy proceedings, with some necessary adjustments [note 1]. Where an insolvency order is made on the petition it will be a bankruptcy order.
54.35 Payment of funeral expenses
The reasonable funeral and testamentary expenses of the deceased debtor have priority over the preferential debts listed in Schedule 6 [note 2]. This includes where a debtor dies after the bankruptcy order is made. If the personal representative of the deceased debtor does not notify the trustee of the funeral expenses before a final dividend is declared, the trustee may declare and distribute the dividend without regard to the claim of the personal representative in respect of reasonable funeral and testamentary expenses [note 3].
54.36 Payment of funeral expenses where debtor dies after the case is closed
In some cases an asset such as an insurance policy that vests in the trustee may become payable on the death of a bankrupt. This may happen some time after the trustee has closed the case and obtained his/her release as trustee. The personal representative may also make a claim in respect of funeral expenses against the amount received by the official receiver as trustee ex officio. The official receiver should charge his/her usual realisation fees and also hold back an amount equal to any debit balance written off on the insolvency estate before making a payment in respect of funeral expenses in such circumstances.
Where a bankruptcy order has been made other than on a debtor's petition and the debtor has subsequently died without submitting a statement of affairs to the official receiver, the personal representative or other person as directed by the court is required to submit a statement of affairs to the official receiver [note 4] [note 5]. This must be submitted within 56 beginning with the date of the request by the official receiver, or a longer period if allowed by the official receiver or by the court [note 6].The requirement to submit a statement of affairs should generally be enforced if the debtor has died before providing information about his/her bankruptcy estate to the official receiver.See also paragraphs 54.15 and 54.16.
The deceased debtor's estate comprises the same property as that which comprises the bankrupt's estate at the date the bankruptcy order is made. Where a debtor dies after the making of a bankruptcy order, any will made by the deceased debtor pre-dating the bankruptcy order is invalid, as all assets vest in the trustee.
Where the deceased debtor dies between the presentation of the petition and the making of the bankruptcy order if property has been disposed of the value lost to the bankruptcy estate is recoverable under section 284, unless one of the exceptions in that section applies, i.e. the disposal was ratified by or made with the consent of the court, or property or payment was received in good faith, for value and without notice of the petition.
Where the deceased debtor dies after the bankruptcy order but before being discharged from bankruptcy and property of realisable value to the estate is ascertained the trustee could claim such property as part of the bankruptcy estate under section 283, or as after acquired property under section 307, as applicable. The trustee may also seek to claim under section 308 items that have previously been considered exempt from the bankruptcy estate under section 283(2) if it comes to light that the items are of excessive value (e.g. antique furniture.)
54.39 Property held under a joint tenancy
If a debtor dies between the presentation of the bankruptcy petition and the making of the bankruptcy order, the debtor's interest in a property held under a joint tenancy accrues to the surviving partner as there has been no severance of the tenancy, Re: Palmer (Deceased) (a debtor) [1994] (3 WLR 420), and the value lost to the bankruptcy estate cannot be recovered. The change in ownership is not caught by the provisions of section 284, which provides restrictions on disposition of property, as accrual by right of survivorship is not a disposition made by the debtor. In addition the provisions of section 421A do not apply as this section is only applicable where an insolvency administration order is made [note 7], see also paragraph 54.30.
Where a deceased debtor dies after the making of a bankruptcy order, any interest in a property previously held by the debtor under a joint tenancy will have already vested in the trustee of the bankruptcy estate, and cannot pass to the surviving partner.
54.40 Sole/principle residence - deceased debtor's home ceasing to form part of estate
Section 283A applies where a debtor dies after the presentation of the petition, if there is an interest in a dwelling house which at the date of the bankruptcy order was the deceased debtor's, the deceased debtor's spouse's or the deceased debtor's former spouse's sole or principle residence.
Where a deceased debtor dies after the presentation of the petition and where the deceased debtor’s interest in his/her or his/her spouse's or former spouse's sole or principal residence comprises part of the bankruptcy estate, the provisions of section 283A may apply. Section 283A was introduced by the Enterprise Act 2002 and provides that the interest in such a dwelling house will re-vest in the bankrupt 3 years from the date of the bankruptcy order (or 3 years from the date the official receiver or other trustee becomes aware of its existence) without conveyance, assignment or transfer unless the trustee has taken action to dispose or otherwise deal with the bankrupt’s interest in it.
In the case of a deceased debtor, the interest in the dwelling house would vest in the personal representative of the deceased debtor, or such person as the court may order. The official receiver should therefore take all necessary steps to realise his/her interest in the property within the three year period (starting at the date of death) in order to avoid a later claim that the property ceases to be comprised in the insolvency estate by virtue of section 283A.
For information on the application of s283A generally see Chapter 33 Part 1 - Bankrupt's interest in the family home.
54.41 The individual insolvency register
Following receipt by the official receiver of a copy of the bankruptcy order, certain information must be entered onto the individual insolvency register and the provisions of rule 6A.4 apply in this regard. The information on the register is drawn from LOIS. In addition, where a bankrupt is deceased, the fact and date of the bankrupt's death must be entered onto the individual insolvency register [note 8]. This information is also drawn from LOIS. The entry of a deceased debtor on the individual insolvency register is removed automatically three months after what would have been the date of discharge if the deceased debtor had not been deceased.
For more details of the general information to be entered on the individual insolvency register on the making of a bankruptcy order, see Chapter 4 Part 2 - Initial Procedure when bankruptcy order made.
[Back to Part 1 - Debtor dying prior to the presentation of the bankruptcy petition] [On to Part 3 - Locating the deceased debtor's personal representative]