When the liquidator finds that the estate's assets are insufficient to pay all creditors and specific legatees, he must act with particular caution and respect the formalities provided for by the Civil Code of Quebec in order to limit the risks of incurring his personal liability .
In particular, he must ensure that the following steps are followed:
The liquidator must draw up an inventory to determine the value of the estate's assets as well as all known debts.
This inventory is essential to determine if the estate has the necessary resources to meet its obligations.
Once the inventory is complete, the liquidator must, among other things, publish a notice of closure:
He must also inform the heirs, the potential successors who have not yet exercised their option, the specific legatees and the known creditors of this publication and of the place where the inventory can be consulted.
These formalities allow interested parties to become aware of the financial situation of the estate and to assert their rights.
When the solvency of the estate is not evident, the liquidator must, in principle, wait until the expiry of a period of 60 days following the registration of the notice of closure of the inventory in the RDPRM before paying the debts or specific legacies, subject to certain exceptions provided by law.
When he finds that the assets are insufficient, he cannot proceed with the payment of debts or specific bequests without respecting the special procedure applicable to insolvent estates.
The liquidator must draw up a complete statement of debts and specific bequests in order to determine the amounts owed and to identify the creditors and legatees concerned.
He must then inform the interested parties of this situation.
The liquidator must prepare a payment proposal that complies with the legal rules regarding the order of payment of creditors and specific legatees.
This proposal must be approved by the court before the liquidator can make any payments. The court may, where appropriate, make any necessary modifications.
Once the proposal is approved, the liquidator must pay the creditors and, if there are any remaining assets, the specific legatees, in accordance with the proposal and the order prescribed by law.
It must not arbitrarily favor certain creditors at the expense of others.
Compliance with the rules relating to the inventory, its publication and the payment of debts is particularly important when the estate is insolvent.
A liquidator who neglects his obligations or makes irregular payments may, depending on the circumstances, incur personal liability for damages caused by his faults .
Furthermore, the absence of an inventory can also have significant consequences for the heirs, particularly with regard to their liability for inheritance debts.
The liquidator of an insolvent estate must therefore avoid any premature distribution of assets and strictly adhere to the formalities prescribed by law before proceeding with the payment of creditors or specific legatees.