Bankruptcy
Posted on 11th March 2024
Bankruptcy is when a person who owes more money they can afford to repay applies for relief from payment of some or all of these debts. However, bankruptcy can impact more than just the person who is bankrupt. In this blog, our Solicitors in Longridge discuss some common scenarios they come across where bankruptcy can have an impact in MG Legal’s practice areas.
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Wills
When choosing an executor or trustee to appoint in your Will, it is important to note that a trustee cannot be someone who is an undischarged bankrupt. Whilst this may not seem fair, especially if you are wanting to appoint someone close to you such as a child or grandchild, the principle is based on the fact that a trustee has a fiduciary duty to the beneficiaries.
Lasting Powers of Attorney
Similarly to acting as a Trustee, an undischarged bankrupt cannot be appointed as an attorney under a Financial Lasting Power of Attorney. This is again based on the fact that they are deemed unsuitable to manage money on someone else’s behalf.
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Court of Protection Deputyship Applications
As with Lasting Powers of Attorney, a Court of Protection appointed Deputy cannot be someone who is an undischarged bankrupt. In addition, a Deputy can flag up as being unsuitable for a range of other factors, such as credit issues in the past, previous criminal charges, among others.
Buying Property
When our Solicitors in Longridge act on a client’s behalf with the purchase of a property, we conduct bankruptcy searches before completion. If the client comes up with entries in relation to a bankruptcy, we would need to consider this further and may be unable to proceed with the purchase of the property. In some cases, these searches can flag up entries unrelated to our client, if for example the person has a common name, such as John Smith, so we would investigate and require confirmation that the charges do not relate to our client.
Payment of Inheritance
Our Solicitors in Longridge often deal with the administration of estates, including the payment of inheritance to beneficiaries under a Will. Before making payment, our team are required to carry out bankruptcy checks against the beneficiaries. If any of them are subject to insolvency proceedings, or are an undischarged bankrupt, we are generally required to contact the trustee in bankruptcy, and arrange to pay the funds to them, to be paid towards discharging the bankrupt person’s debts.
Whilst our Solicitors in Longridge do not specialise in applications for bankruptcy, there are scenarios that our team deal with on a daily basis which give rise to reasons to consider bankruptcy and how this could impact the actions we could take on behalf of our clients.
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