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CS Professional · Insolvency and Bankruptcy - Law and Practice · Bankruptcy for Individuals and Partnership Firms

Mr. Arvind Shah, a bankrupt, died, and after the trustee paid all debts, administration costs and interest under section 178 in full, a surplus remains in the trustee's hands. What should the trustee do with it?

Once all debts, administration costs and interest are paid in full, the surplus goes to the legal representatives of the deceased bankrupt's estate, or is dealt with in the prescribed manner. Creditors are already fully paid and the trustee cannot keep the surplus.

  1. APay it to the legal representatives of the estate or deal with it in the prescribed mannerCorrect
  2. BDistribute it pro rata among the creditors as additional dividend
  3. CDeposit it with the Debt Recovery Tribunal as unclaimed amount
  4. DRetain it as additional remuneration for the trustee

Explanation

Section 170(4) says that once all debts, costs and interest are paid in full, any surplus is paid to the legal representatives of the deceased bankrupt's estate or dealt with as prescribed. Creditors have already been paid in full, so a further dividend is not applicable, and the trustee has no right to keep it.

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