Once the inventory has been completed and the notice of closure of inventory has been published, the liquidator must pay the succession’s debts – in other words, the debts left by the deceased.
A cautious liquidator will wait a few days before beginning to pay the debts, in case the inventory is affected by the discovery of unknown property or creditors. The liquidator should seek legal advice to avoid mistakes.
When paying the debts, three situations may occur:
- the succession is solvent – in other words, the value of the assets is greater than the value of the debts;
- it is unclear whether the succession is solvent;
- the succession is not solvent – in other words, the value of the debts is greater than the value of the assets.
THE SUCCESSION IS SOLVENT
If the succession is solvent, the liquidator immediately pays the debts, including:
- any electricity, telephone and heating bills and all other current expenses;
- the funeral expenses;
- the claims resulting from partition of the family patrimony and liquidation of the matrimonial or civil union regime;
- the compensatory allowance, if any, that is owed to the surviving spouse;
- all the other debts of the succession.
The liquidator must also pay any legatees by particular title.
IT IS UNCLEAR WHETHER THE SUCCESSION IS SOLVENT
It may still be unclear whether the succession is solvent, even after closure of the inventory.
In this case, the liquidator cannot pay the debts until 60 days have elapsed:
- either from registration of the notice of closure of inventory in the register of personal and movable real rights;
- or from the time he or she was exempted from making an inventory.
To sell property from the succession, the liquidator must obtain the consent of the heirs or, failing that, the permission of the court.
The liquidator may, however, before the 60 days have elapsed, pay:
- the deceased’s current expenses (e.g. electricity, telephone and heating bills);
- any pressing debts.
THE SUCCESSION IS NOT SOLVENT
If the property of the succession is insufficient to cover all the debts, the liquidator cannot pay any debt or legacy by particular title until he or she:
- has drawn up a complete statement of the debts and legacies by particular title;
- given notice to the interested parties;
- has obtained court approval for a payment proposal.
The payment proposal must be drafted according to certain rules, including those which state that creditors must be paid in the following order:
- preferred creditors (those whose claims relate to legal costs, movable property, tax laws or property taxes) and hypothecary creditors, according to their rank;
- the other creditors;
- the support creditors;
- the legatees by particular title.
If it is impossible to pay all the other creditors or support creditors in full, you must pay them on a pro rata basis, according to the amounts they are owed.
Other rules apply if there is insufficient property to pay all the legatees by particular title.
You may negotiate with the creditors to obtain a voluntary reduction of their claims, in order to satisfy as many of them as possible. To do this, you must explain the situation of the succession in detail to the creditors, disclose all relevant facts and obtain their written consent.
Source: Justice Quebec
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