Bankruptcy and deceased estates do not necessarily interact as one would expect. A common example is it is not only possible but is the norm for a deceased bankruptcy to continue to be administered as if the bankrupt had not died.[1]

Where a person dies before becoming a bankrupt, or dies after having a creditor’s petition presented/served[2], then Part XI of the Bankruptcy Act 1966 (“Act”) applies and a Trustee is appointed over the Deceased Estate. Similarly, a person administering a deceased estate (the Executor or court appointed administrator) may also lodge a petition for bankruptcy of the deceased estate. [3]

What is interesting and distinguishes Part XI from its equivalents under the Act for someone that is not deceased, is the fact that the deceased does not have to be insolvent for an order to be made by the Court. [4]

So why is this important?

If you are a creditor that:

1.    is finding it difficult to establish the details of the person administering the estate;

2.    has no faith in the court appointed administrator/executor of the deceased estate;

3.    is unhappy with the administrator/executor’s communications or attitude;

4.    Is unsure about the actual solvency of the deceased estate[5]

5.    seeks an independent person to objectively review the pursuit of proceedings, especially where you are aware of family disputes5,[6];

6.    seeks to undo immediate vesting of property under a will[7];

7.    has been promised payment under a will only to discover they are not named in the will; or

8.    is aware of potential dispositions of assets or wants that aspect investigated and potentially prosecuted under the antecedent transaction provisions of the Act[8].

You can appoint a trustee in bankruptcy to investigate and deal with all creditor claims before any distributions to beneficiaries under the Will.

If you are the court appointed administrator or Executor and the deceased estate is or may be insolvent or complex due to litigation, competing interests or just a large number of creditors you may mitigate personal risk and seek the expertise of a Trustee in Bankruptcy to work through these issues.

This is a useful tool and the Rodgers Reidy network of Registered Trustees across each state and the Northern Territory are specialists in all areas of Bankruptcy and are able to assist. Further, we are not just active in such areas, we are at the coal face of such cases as Reidy (Trustee), in the matter of Hawksford (Bankrupt) [2015] FCA 432.

We look forward to discussing how we may assist you on a no obligation cost free basis.

[1] Section 63, Bankruptcy Act 1966.
[2] Section 245, Bankruptcy Act 1966.
[3] Section 247, Bankruptcy Act 1966.
[4] Section 247A(1)(c).
[5] Hancock Prospecting Pty Ltd [1999] FCA 295
[6] Bonberra Pty Ltd v Hawksford (Administrator), in the matter of the Estate of Hawksford [2013] FCA 838.
[7] Section 251, Bankruptcy Act 1966.
[8] Donnelly (trustee of Hancock) v Porteous [2001] FCA 1288