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

Mr. Sameer Khanna, a bankrupt, died during the administration of his estate. His son, as legal representative, paid proper funeral and testamentary expenses of Rs 80,000 and claims reimbursement. How should the bankruptcy trustee treat this claim?

The trustee must have regard to the legal representative's claim for proper funeral and testamentary expenses, and it ranks equally with secured creditors in the section 178 priority. Administration of a deceased bankrupt's estate continues under the Chapter V provisions as far as applicable.

  1. AReject it, since bankruptcy ends on the bankrupt's death
  2. BRank it below all unsecured creditors
  3. CHave regard to it, and it ranks equally with secured creditors in the priority under section 178Correct
  4. DPay it only from surplus after all debts are paid

Explanation

The Code says the Chapter V provisions apply to a deceased bankrupt's estate, and the trustee must have regard to proper funeral and testamentary expenses claimed by legal representatives. Such claims rank equally with secured creditors under section 178. Paying only from surplus would wrongly demote the claim.

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