Refusing an inheritance completely during bankruptcy

helpingrelatives

Hello

I have a relative in this situation:

- Declared bankrupt recently (so within the 1 year period and not discharged)
- Relative died after they were discharged bankrupt
- Inheritance (including % of a property) expected (details and timings all TBC)

Obviously they have to tell the OR about the inheritance, and a deed of variation is no good as the OR can over rule that.

So -

a) can they simply refuse the inheritance, so it's returned to the estate and divided between the other beneficiaries (their other relatives)?

b) can the OR stop them do this?

c) what's the mechanism for doing this - tell the solicitor acting on the Will?

Thank you in advance

debtinfo

no it is to late now

how much is the inheritence worth and what is the total of their debts, also how far into the bankruptcy are they

helpingrelatives

- 1 month into bankruptcy.

- £80k in debt.

- Inheritance amount unknown, but probably less than that.

Thanks

Gimpsdad

Assuming that it was a typo when you said that "relative died after discharged bankrupt" and you meant declared bankrupt, there are a number of answers you can count on.

a) no
b) yes
c) The solicitor acting as executor, unless it is specifically written into the terms of the will that the legacy is not to be used for Insolvency, will be bound to hand the money over to the Trustee.

All bad so far. However, whilst not calling into question debtinfo, all is not 100% lost. In certain circumstances, an OR can recommend a fast track IVA if it is appropriate. Now, your relative doesn't fit the published criteria for such a procedure, but that doesn't mean that it cannot be done.

Where there are assets to dispose of (typically a property, but not always) an OR will usually appoint an outside IP to oversee that process. An IP's costs as Trustee in BR are very considerable, and are preferential when the estate is being divided. If an argument can be made that a return in BR is less than the return in IVA, then a lump sum can be proposed as a one off payment. This would annul the BR and allow your relative to at least keep some of the cash.

Post BR IVA's are not common, but can be done, I have arranged a dozen or more in the last 3 months alone. Seek advice urgently from 2 or 3 IP firms. Ask if they have experience in this field and go from there. Also be careful to pick a firm that will not charge any fees unless the proposal is accepted. That way, even if rejected, you will not incur any cost.

debtinfo

I presume you dont actually mean a Fast Track Voluntary Arrangement as that is an arrangement administered by the OR themselves and are exceedingly rare. But rather an ordinary IVA on the basis of an annulment being granted.

That was waht i was getting and when i asked the questions i did. Now with the value of the inheritence being less than the debts that is less attractive but not impossible. The main thing to point out is that the OP will still not see any of the money but the advantage is the removal of the bankruptcy from the record. Although it will then be replaced by an IVA which in many aspects but not all is nearly as bad as a bankruptcy.

The possible hinderence to doing this is that all the OP's assets are part of the bankruptcy for the time being and so cannot be used to propose the IVA, so someone else would have to stump up the money in the short term to propose the IVA, (although they can be paid back from the OP's assets after the annulment, also remember that the OR's costs must be paid in full, although at this stage are not a massive amount.

Gimpsdad

The intention was to illustrate that there was a way out, unlikely as it may seem and contrary to your assertion that it was too late. You will note that I also said that the OP's relative would not qualify for the OR driven FTVA.

I would hesitate to declare that the OP will still not see any of the money, as we are not in possession of the full facts of the case. As an IVA is an alternative to BR then as long as it is a commercially attractive deal to creditors, it does not necessarily follow that all will be lost. If an outside IP is appointed as Trustee then any deal that will return more than the dividend that would be received after those costs are met will be treated on its merits, and therefore may not necessarily mean that the whole amount is lost.

It is not ideal, the ideal is that the OP's relative wasn't BR, but there you go. I also disagree with you that an IVA is not possible due to the assets forming part of the estate, I have arranged a number of them previously that propose disposal of assets, usually property, to return a better dividend, and leave the debtor with at least something from the wreckage. It still depends on the creditor(s) agreeing to the proposal at creditors meeting of course, but no IP would go out on a limb in a case like this if they did not feel that there was a very good chance of success. Indeed, it is entirely possible that some IP's wouldn't touch the case at all, but as I have seen it done previously, and however unlikely it may seem, it has to be worth consideration at least.

Hatecreditors.com

I know I'm going to get shouted out for 'not being helpful' and all the rest of it but have to say what you are trying to do is terrible.

What your relative is basically saying is 'hey Creditors, I've spent £80,000 of your money and I'm not paying it back. Not only that, I'm going to shaft you again by not giving you any inheritance I may receive.

Gimpsdad

You won't get shouted down by me. Your opinion and point of view is as valued as anyone else, and I see where you are coming from.

My own view is that you are right in many ways, however on the other side of the coin, it is a shame that the OP's relative would almost certainly not have wished that the money go to creditors and in a similar situation most people would also view it as a shame that someone elses money, as it was, is used to pay creditors with. I know I would be gutted if I had already had the trauma of being made bankrupt, only to then be hit with the sickening realisation that a relatives gift to me was being taken away. Thats a personal view of course, but as I say, your argument also carries a lot of weight.

The answer I gave to the OP was not to do with opinions though, it was a simple statement of an option that could be explored that may actually benefit all sides. Impossible to tell without facts of course, but if it is of potential benefit to all parties then in the end there are no losers. The OP's relative, best possible result, will still lose a very significant chunk of the inheritance and will still lose all of it if an IVA proves impossible to arrange to annul the BR.