John Poyser's Comment on Insolvent Estates

Where some see problems, creative lawyers like John Poyser, of the law firm Inkster, Christie, Hughes in Winnipeg, Manitoba, find solutions. Ten days ago, I wrote a post here about insolvent estates in British Columbia, in which I said that if the estate is insolvent, the estate assets will go to creditors, rather than to the beneficiaries of the deceased's will. In response, John wrote the following comment:

When a bankrupt estate presents, a partnership between the heirs and creditors can be brokered in some circumstances. In the right case, it is "win, win."

I am handling a bankrupt estate right now. We are cutting a deal with the creditors. A family member will apply for administration (there was no will), and will collect on the assets that are available. The family member would have been the intestate heir of the deceased. The deal is that she will keep 35 cents on the dollar. In other words, if she collects $20K, she keeps $7K and gives the remaining $13K to the creditors.

Everyone wins. She gets a little bit of an inheritance. The creditors get some money. She knows his affairs and is in a position to maximize the amount collected (she can sell the stuff in his apartment -- she lives down the way). The estate is modest and the creditors will not think it worth their while to apply for administration themselves. They would be stumbling in the dark if they tried.

This may not work as well when the dollar amounts are in the millions, but is worth pursuing in many cases.

This approach can also work in British Columbia in the right circumstances, and with cooperative creditors.

In addition to assisting clients in his busy law practice, John Poyser has co-written Practitioner's Guide to Trusts, Estates and Trust Returns 2005-2006 published by Carswell and available here, and is the incoming chair of the Canadian Bar Association National Wills and Estates Subsection. Most importantly, he also finds time to comment on my blog.