A family recently approached us looking for information after a relative had passed away. Various creditors were trying to collect from the estate; which did not have sufficient assets to be able to pay the debts in full. The creditors were making demands on the executor of the estate.
We advised the executor that he must first bring an application to bankruptcy court and obtain an order for the estate to be assigned into bankruptcy.
The executor of the estate realized that there were not sufficient assets in the deceased’s estate for a fair distribution to all the creditors, and that bankrupting the estate was the best option as the creditors would benefit by way of dividend on a prorated basis.
Any remaining shortfall to creditors would be part of the bankruptcy estate.