Section 170 of The Insolvency and Bankruptcy Code, 2016.
- (1)All the provisions of Chapter V relating to the administration and distribution of the estate of the bankrupt shall, so far as the same are applicable, apply to the administration of the estate of a deceased bankrupt.
- (2)While administering the estate of a deceased bankrupt, the bankruptcy trustee shall have regard to the claims by the legal representatives of the deceased bankrupt to payment of the proper funeral and testamentary expenses incurred by them.
- (3)The claims under sub-section (2) shall rank equally to the secured creditors in the priority provided under section 178.
- (4)If, on the administration of the estate of a deceased bankrupt, any surplus remains in the hands of the bankruptcy trustee after payment in full of all the debts due from the deceased bankrupt, together with the costs of the administration and interest as provided under section 178, such surplus shall be paid to the legal representatives of the estate of the deceased bankrupt or dealt with in such manner as may be prescribed.
Summary
- The rules for managing and distributing a bankrupt person's property continue to apply even if the bankrupt person dies.
- The bankruptcy trustee must respect and acknowledge claims made by the deceased bankrupt's family or legal representatives for funeral and will-related expenses.
- These funeral and will-related expenses are given high importance and rank equally with secured creditors, who are lenders holding rights over property.
- Any leftover money, after paying all debts, administrative costs, and interest, must be handed over to the deceased bankrupt's legal representatives or handled as rules prescribe.
Practical examples
FAQ
1. What happens to a bankruptcy case if the debtor dies under Section 170 of the Insolvency and Bankruptcy Code, 2016?
Under Section 170 of the Insolvency and Bankruptcy Code, 2016, the bankruptcy proceedings continue, and the estate of the deceased bankrupt is administered and distributed as if the person were still alive.
2. Are funeral costs of a bankrupt paid first under Section 170 of the Bankruptcy Code?
Yes. Under Section 170 of the Bankruptcy Code, the proper funeral and testamentary expenses of the deceased bankrupt rank equally with secured creditors, which is a very high priority.
3. Who gets the leftover money from a deceased bankrupt's estate under Section 170 of the 2016 Insolvency Code?
Under Section 170 of the 2016 Insolvency Code, any surplus remaining after paying all debts, costs, and interest must be paid to the legal representatives of the deceased bankrupt or dealt with as prescribed.
Test yourself
Q1.Under Section 170 of the Insolvency and Bankruptcy Code, 2016, how do the claims for proper funeral and testamentary expenses made by the legal representatives of a deceased bankrupt rank in priority?
Q2.Under Section 170 of the Insolvency and Bankruptcy Code, 2016, if a deceased bankrupt's estate is fully administered, all debts and interest are paid, and a surplus remains, who receives this surplus?
Q3.Under Section 170 of the Insolvency and Bankruptcy Code, 2016, which provisions govern the administration and distribution of a deceased bankrupt's estate?
Q4.Under the Insolvency and Bankruptcy Code, 2016, if a deceased bankrupt's estate is being administered under Section 170, and a secured creditor decides to surrender their security interest for the general benefit of creditors under Section 172, how does this surrender affect the priority of the deceased's funeral expenses?