18 - insolvent distribution of estate

Insolvent Distribution of Estate Introduction An insolvent estate is one where the assets are inadequate to cover the liabilities Re Leng [Insolvency is a matter of fact] Re Smith [court may order inquiry if financial status in dispute i.e. whether solvent or insolvent] Methods of Distributing in Insolvent Estate Out of Court Agreement -PR negotiates with creditors & beneficiaries to compromise w/o court Under Court's direction under Part 67 CPR Part 67 Civil Procedure Rules FDCF with affidavit - all PRs must be parties to action as claimants or defendants Under Bankruptcy Act PR's responsibility PRs may be personally liable hence they should ensure that they follow the right order of paying estate's debts PRs should also ensure that they advertise for creditors as they may be personally liable where they fail to do so PR should ensure that debts are proven satisfactorily before they settle them Bankruptcy Act Where creditors are owed more than $40 - can petition court for administration Affidavit must show estate insolvent Court give notice to PR before issuing order Estate vests in Trustee in Bankruptcy for administration Funeral & testamentary expenses must be paid over to PR subject to rights of secured creditors Any surplus paid to PR Order under Bankruptcy Act Funeral, Testamentary & Administration expenses Secured Creditors [legal mortgages, charges and liens] Take precedence from the realization of the security they possess If security unsufficient, they will prove for the balance as unsecured creditor Can set a value on security and prove for balance as unsecured credutor Can also surrender security and prove for debts as unsecured creditor Preferential Debts [public taxes up to a year in value, wages and salaries up to 4 months's vaue, NIS, NHT, Redundancy payments] This is to be paid in proportion [section 139] Ordinary Creditors [unsecured creditors, e.g. creditor who obtains a judgement debt etc] All ranked equally and paid in pari pasu Deferred Debts [creditors not for value, eg. spouse or other relatives]

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Distribution of Insolvent Estate

TRANSCRIPT

Inso

lvent

Dist

ributio

n of E

state

Intro

duct

ion

An insolvent estate is one

where the assets are

inadequate to cover the

liabi

lities

Re Le

ng

[Inso

lve

ncy

is

a

m

atte

ro

f fa

ct]

Re Sm

ith[court may order

inquiry if financial

status in dispute

i.e. whether

solvent or insolvent]

Methods of Distributing

in Insolvent Estate

Out of Court Agreement

-PR negotiates with

creditors & beneficiaries

to compromise w/o court

Under Court's direction

under Part 67 CPR

Part 67 Civil Procedure Rules

FDCF with affidavit

- all PRs must be parties

to action as claimants or

defe

nda

nts

Under Bankruptcy Act

PR's responsibility

PRs may be personally liable

hence they should ensure that

they follow the right order

of paying estate's debts

PRs should also ensure

that they advertise for

creditors as they may be

personally liable where they

fail to do so

PR should ensure that

debts are proven

satis

fact

orily

be

fore

th

eyse

ttle

them

Bankr

upt

cy Ac

tWhere creditors are

owed more than $40

- can petition court for

adm

inis

tratio

n

Affid

avit

must

sh

owestate insolvent

Court give notice to PR

before issuing order

Estate vests in Trustee

in Bankruptcy for

adm

inis

tratio

n

Funeral & testamentary

expenses must be paid

over to PR subject to rights

of secured creditors

Any surplus paid to PR

Order under Bankruptcy Act

Funeral, Testamentary &

Adm

inis

tratio

n ex

pen

ses

Secured Creditors

[legal mortgages, charges

and

liens]

Take precedence from

the realization of the security

they possess

If security unsufficient,

they will prove for the

balance as unsecured

cre

dito

r

Can set a value on

secu

rity

an

d pr

ove

for balance as unsecured

cre

duto

r

Can also surrender security

and prove for debts as

unse

cure

d cr

edi

tor

Pref

ere

ntia

l De

bts

[public taxes up to a year

in value, wages and salaries

up to 4 months's vaue,

NIS, NHT, Redundancy payments]

This is to be paid in

pro

porti

on

[sect

ion

13

9]O

rdin

ary

Cred

itors

[unsecured creditors, e.g. creditor

who obtains a judgement debt etc]

All ranked equally and

paid in pari pasu

Def

erre

d D

ebts

[creditors not for value, eg. spouse

or other relatives]