19 July 2019
Estates - Administration of insolvent estates
We are currently acting for an insolvent estate. How do we proceed? In this particular case, there is no will. Do we need to apply for letters of administration before making an application for bankruptcy?
Thank you for the question.
An insolvent estate can be handled under the relevant state laws or Part XI of the Bankruptcy Act 1966 (Cth). See s 39 of the Administration and Probate Act 1958 (Vic) which provides for the application of the Commonwealth bankruptcy rules.
In cases with no assets or very few assets to distribute to creditors, administration under state laws may be the easiest approach. This involves notifying creditors that no assets are available to pay the deceased’s debts and requesting that creditors write off their debts.
Otherwise, s 247 of the Bankruptcy Act 1966 (Cth) allows the person administering the estate to apply to appoint a bankruptcy trustee when they conclude that the estate is insolvent.
Where there is no will, an application for letters of administration is required before an application for the appropriate order can be made.
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