Financial difficulties can strike anyone at any time, and in extreme cases, may lead to bankruptcy.
Bankruptcy is a legal status that applies to a person who cannot repay their debts or have broken the terms of an individual voluntary arrangement (IVA).
When a person is declared bankrupt, their assets are usually taken control of by a trustee who is an individual who works for the Insolvency Service.
Once a person is declared bankrupt, they remain so until they are discharged, which typically happens one year after the bankruptcy order is made.
Bankruptcy and Wills
An individual’s bankruptcy can have significant implications for their Will.
If a person is declared bankrupt, any assets they own at the time of their bankruptcy (or acquire while they are bankrupt) will be assigned to their trustee.
This means that these assets are no longer theirs to add into their Will.
However, once a person is discharged from bankruptcy, any assets they acquire after that point will not be affected by the bankruptcy. They can distribute these assets in their Will as they see fit.
Bankruptcy and probate
The impact of bankruptcy on the probate process largely depends on whether the deceased was bankrupt at the time of their death or had been discharged from bankruptcy.
If a person dies while they are bankrupt, their trustee will continue to administer their estate. The trustee will collect and sell the deceased’s assets to repay their creditors.
Only once all debts and bankruptcy costs have been paid will any remaining assets be distributed according to the deceased’s Will (or the rules of intestacy if there is no Will).
If a person dies after they have been discharged from bankruptcy, the probate process will be the same as for anyone else. Their executor will collect in and distribute their assets according to their Will (or the rules of intestacy if there is no Will).
Bankruptcy can have significant implications for a person’s Will and the probate process. However, the impact largely depends on whether the person is still bankrupt at the time of their death or has been discharged from bankruptcy.
If you are dealing with the estate of someone who was bankrupt, our expert legal team are on hand to give advice and ensure you understand and fulfil your responsibilities.
Please contact us today for more information.