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Can Someone Who is Tied up in Bankruptcy be Appointed as an Executor or Power of Attorney?

When writing up a Will or Power of Attorney one needs to be careful that the person(s) being appointed are trustworthy and capable. There are also potential legal limitations if a person appointed has declared bankruptcy.

Appointment of an Undischarged Bankrupt as Executor:

The Trustee Act states, at section 9(1) that:

The court may make an order appointing a new trustee either in substitution for, or in addition to, any existing trustee or trustees, or although there is no existing trustee, (a) in any case where it is found inexpedient, difficult, or impracticable, so to do without the assistance of the court, in particular and without limiting the generality of the foregoing, in case of a trustee who […] is a bankrupt, […].

This means that the court may remove a person who is, among other things, bankrupt. An undischarged bankrupt can potentially be an executor of a Will, but it complicates the process. The bankrupt executor’s status as executor may be challenged on the grounds that they are unsuitable for the position.  A person who has declared bankruptcy may not be a suitable person to be in charge of handling trust funds, and administering an estate.

While it is technically possible for a bankrupt person to be the executor in a Will in reality it is not the best idea.

Appointment of an Undischarged Bankrupt as a Power of Attorney:

A person that is an undischarged bankrupt cannot be appointed as a Power of Attorney over another person’s financial affairs.

Section 16 of The Power of Attorney Act says:

An individual is eligible to be an attorney under an enduring power of attorney if, at the time the donor signs the document, the individual is an adult and mentally competent and is not an undischarged bankrupt.

Once they have been discharged from the bankruptcy they can then be appointed as a Power of Attorney. Having a bankruptcy in your past does not prevent you from becoming a Power of Attorney. However, until the discharge has occurred the Powers of Attorney Act prohibits an undischarged bankrupt person acting on a Power of Attorney.

[It should also be noted that, under The Power of Attorney Act, the authority of an appointed Power of Attorney terminates if he or she becomes bankrupt.  If multiple persons are granted Power of Attorney and one or more of them become bankrupt, the remaining persons with Power of Attorney may be able to make decisions without the bankrupt person.]

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