14 Dec Case Study – Bankruptcy: Interest in a Deceased Estate and Annulment
Too often we encounter non-compliance by a bankrupt while managing their bankrupt estate. The implications for this can be far reaching and financially onerous making the process challenging for both the Bankrupt and the Insolvency Practitioner.
The below case study provides an inside look at a recent Bankruptcy matter SV Partners were appointed to where the Bankrupt held an interest in a deceased estate.
The Bankrupt declared himself bankrupt by way of a Debtor’s Petition in October 2015 and a Trustee was appointed. At this point in time, the Bankrupt’s creditors totalled $30,000 comprised of 3 credit cards.
The Bankrupt had no other assets and was not liable to contribute to his estate, from his income.
During the course of his bankruptcy, the Bankrupt was the sole beneficiary of the Deceased Estate of his late father (the Deceased Estate). The main asset of the Deceased Estate was a property with an estimated equity position of $400,000. The Bankrupt’s interest in the Deceased Estate vested as an asset in the bankruptcy.
The Bankrupt had become involved in Family Law Proceedings with his previous spouse shortly prior to his discharge.
The Bankrupt was discharged in October 2018 and SV Partners were appointed the replacement Trustees in November 2019.
Upon our appointment, we liaised with the Bankrupt regarding the Deceased Estate. At this point, Probate of the Deceased Estate had not been applied for and the property remained in the name of the Bankrupt’s late father.
We explained to the Bankrupt that the property would need to be sold and Probate granted for the Deceased Estate, to enable the annulment of the bankruptcy. The Bankrupt advised that he did not wish to become involved in the Deceased Estate. As a result, we had no alternative but to engage a Solicitor to apply for the Grant of Probate.
The Bankrupt also advised that he did not wish to become involved in the Family Law Proceedings, which involved the Deceased Estate as the primary asset. Accordingly, we had no alternative but to engage a Solicitor to act on our behalf as part of the Family Law Proceedings.
Approximately half way through the Family Law Proceedings and the application for the Grant of Probate, the Bankrupt engaged two different solicitors to represent him in each respective proceeding. Each Solicitor practised solely in their respective fields and did not have any knowledge of bankruptcy law.
The Grant of Probate was subsequently provided and the property was sold. Consent Orders were entered into in relation to the Family Law Proceedings, allowing for sufficient funds to be provided to the Bankrupt Estate to allow for its annulment.
As a result of the timing, creditor interest claims and the costs involved in the Deceased Estate and Family Law Proceedings, the Bankrupt Estate required $120,000 to allow for the annulment.
The Bankrupt Estate was subsequently annulled in August 2020 with creditor interest paid from October 2015 to August 2020.
Key Take Away Points
Provide cooperation with your Bankruptcy Trustee.
If the Bankrupt had acted on the Deceased Estate and had agreed to assist us in the Grant of Probate and the Family Law Proceedings, the Bankrupt would have avoided the additional legal costs incurred by the Trustees and reduced the amount of interest required to be paid to creditors.