---
title: "Set how an insolvent estate pays its debts"
url: "https://ailawframework.com/practice/wills-estates-probate-and-succession/set-how-an-insolvent-estate-pays-its-debts"
type: "task"
site: "AI Law Framework"
id: "A17-SF20261022-22"
practice_area: "Wills, Estates, Probate & Succession"
tier: "yellow"
lawyer_review: "required"
last_reviewed: "2026-10-22"
---

# Set how an insolvent estate pays its debts

> From the asset and debt lists, record whether the estate can pay the debts and liabilities in full. If it cannot, list the funeral, testamentary and administration expenses separately from the other debts.…

Canonical page: https://ailawframework.com/practice/wills-estates-probate-and-succession/set-how-an-insolvent-estate-pays-its-debts  
Last reviewed: 2026-10-22

Site index for agents: https://ailawframework.com/llms.txt

## Key facts

| Fact | Value |
| --- | --- |
| Practice area | [Wills, Estates, Probate & Succession](https://ailawframework.com/practice/wills-estates-probate-and-succession.md) |
| Human involvement | Yellow: Lawyer and AI draft together |
| How AI is used | From the asset and debt lists, record whether the estate can pay the debts and liabilities in full. If it cannot, list the funeral, testamentary and administration expenses separately from the other debts. Do not rank the other debts. The tool does not pay a creditor. |
| What the lawyer must review | Section 46C(1) of the Probate and Administration Act 1898 (NSW) says that where the estate is insolvent, the real and personal estate is administered in accordance with Part 1 of the Third Schedule, subject to the Bankruptcy Act 1966. Insolvent means insufficient for payment in full of the debts and liabilities. The section applies to a person dying after the commencement of the Conveyancing (Amendment) Act 1930. That date was not opened. Part 1 says the funeral, testamentary and administration expenses have priority. Subject to that, the same rules apply as under the law of bankruptcy in force at the death, as to secured and unsecured creditors, debts and liabilities provable, the valuation of annuities and future and contingent liabilities, and the priorities of debts and liabilities. The date of death is substituted for the date of the sequestration order. The bankruptcy priority classes were not opened, so they are not listed. The solvent order in Part 2 is a separate task and is not used here. |
| Written for / versions | 1 jurisdiction versions below |

## Checking plan

**Line-by-line review**

Review the complete output at the level of each line; check facts, meaning and omissions.

- What the AI does: From the asset and debt lists, record whether the estate can pay the debts and liabilities in full. If it cannot, list the funeral, testamentary and administration expenses separately from the other debts. Do not rank the other debts. The tool does not pay a creditor.
- What the lawyer does: Section 46C(1) of the Probate and Administration Act 1898 (NSW) says that where the estate is insolvent, the real and personal estate is administered in accordance with Part 1 of the Third Schedule, subject to the Bankruptcy Act 1966. Insolvent means insufficient for payment in full of the debts and liabilities. The section applies to a person dying after the commencement of the Conveyancing (Amendment) Act 1930. That date was not opened. Part 1 says the funeral, testamentary and administration expenses have priority. Subject to that, the same rules apply as under the law of bankruptcy in force at the death, as to secured and unsecured creditors, debts and liabilities provable, the valuation of annuities and future and contingent liabilities, and the priorities of debts and liabilities. The date of death is substituted for the date of the sequestration order. The bankruptcy priority classes were not opened, so they are not listed. The solvent order in Part 2 is a separate task and is not used here.
- Who reviews: Responsible lawyer with competence in the matter
- Basis: Practical workflow informed by the linked primary sources; the traffic light and working checks are editorial guidance, not a court classification.
- Why: The level reflects what the work is, the consequence of an error, and how much of the output the lawyer must independently re-derive.

## Checks the lawyer makes

1. Use Part 1 only if the estate cannot pay the debts and liabilities in full. The solvent order is a different task.
2. Put funeral, testamentary and administration expenses ahead of the other debts.
3. Do not write a bankruptcy priority list. Those rules were not opened. The date of death replaces the sequestration order.
4. The order is subject to the Bankruptcy Act 1966. The lawyer applies that Act.

## Notes

- These are suggested working checks. Confirm the required checking with the responsible lawyer before work starts; the checking approach does not establish permission to use AI.

## Sources

- [Probate and Administration Act 1898 (NSW) section 46C](https://classic.austlii.edu.au/au/legis/nsw/consol_act/paaa1898259/s46c.html) (checked 2026-10-22)
- [Probate and Administration Act 1898 (NSW) Schedule 3](https://classic.austlii.edu.au/au/legis/nsw/consol_act/paaa1898259/sch3.html) (checked 2026-10-22)

## Jurisdiction versions

| Jurisdiction | Level |
| --- | --- |
| [United States](https://ailawframework.com/practice/wills-estates-probate-and-succession/set-how-an-insolvent-estate-pays-its-debts/united-states.md) | Yellow |

*Practice guidance for planning and review. Confirm current primary sources and the requirements of the actual matter. This is general information, not legal advice.*