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

Mr. Ramesh Iyer, an individual bankrupt, has died during the bankruptcy process. His son, as legal representative, has paid the funeral and testamentary expenses. The bankruptcy trustee is administering the estate. How will the son's claim for these expenses be treated?

The claim for proper funeral and testamentary expenses made by the legal representatives ranks equally with secured creditors in the section 178 priority. The Code expressly provides this for a deceased bankrupt's estate, so it is not a surplus-only or subordinated claim.

  1. AIt ranks equally with secured creditors in the priority under section 178Correct
  2. BIt ranks below all unsecured creditors and is paid only from any surplus
  3. CIt is rejected because the bankruptcy ends on the death of the bankrupt
  4. DIt ranks equally with the workmen's dues and is paid after secured creditors

Explanation

Under section 170, the trustee must have regard to the legal representatives' claim for proper funeral and testamentary expenses. Section 170(3) says these claims rank equally with secured creditors in the priority under section 178. The option placing them below unsecured creditors is wrong because it ignores that ranking.

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