Insolvent? bankrup? broke? bust? skint?
It’s no thrill when you have to deal with an estate and there’s barely enough money to pay for the funeral, let alone anyone else,
Yet there may still need to be a formal administrator because there may be land, or assets above $15,000, that have to be sold to pay debts.
Was a bankruptcy order already in place?
If the deceased was already made bankrupt by the court before their death, that process will continue through the Insolvency Service. You don’t need to apply for probate or letters of administration. To check whether someone is already bankrupt, search the Insolvency Register.
If the deceased was not already bankrupt, you can apply for probate or letters of administration if you would otherwise be entitled to. So, if you are the executor of a valid will, you can still apply for probate. If you are a beneficiary where there is no will, you can apply for letters of administration – just don’t expect to get anything at the end of it, because the creditors will have first claim.
If you’re a creditor, you can apply for letters of administration
If you’re a creditor of someone who has died, and no one has applied for probate or letters of administration, you can make an application yourself – but only if the person who would normally apply has refused to do so.
For example, if the deceased left no will and had no surviving spouse or partner, and had two adult children, those children would be expected to apply for letters of administration. A creditor can apply for letters of administration if they give notice to the children and the children fail to apply. They can then pay estate debts in the same priority as under the Insolvency Act without needing a formal application for bankruptcy.
If you are the only creditor, or if all the creditors agree, AND if there are no potentially voidable transactions, that may be the simplest approach. It will probably be quicker than using the Insolvency Act.
(A voidable transaction is a transaction made by the deceased that may be overturned under the Insolvency Act – for instance because it favoured one creditor at the expense of others, or it moved assets to avoid creditors.)
But it’s probably better to use the Insolvency Act
However, if there are several creditors, or issues about transactions, or any other complications, there will still need to be an application under Part 6 of the Insolvency Act. So it usually makes sense to use the Insolvency Act from the beginning. A creditor can make that application if probate or letters of administration have not been issued and more than 4 months have passed since the death.
Kiwilaw does not do Insolvency Act applications.
For more guidance, talk to an insolvency lawyer, or other insolvency practitioner (not necessarily a lawyer). See also Dobbie’s Probate and Administration Practice (6th edn) chapter 51 (Practice – Insolvent Deceased Estates).
Cheryl Simes
31 March 2021