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Section 238 of Insolvency Act CAP 53: Post-bankruptcy interest payable at prescribed rate if surplus remains

    

(1) The bankruptcy trustee shall pay interest on all allowed creditors' claims at the prescribed rate if surplus assets remain after the bankruptcy trustee has paid the claims.
(2) The bankruptcy trustee shall pay the interest from and including the date on which the bankruptcy commences to the date on which the debt is paid.
(3) If the surplus is not enough to pay the interest in full on all debts, payment of the interest is to abate rateably among those debts.
Example:
A and B are the only creditors of the bankrupt, C. A's contract with C provided for interest of 20 percent but B's contract did not provide for interest. C's bankruptcy commenced on 1 July 2015. At that date— (1) C owed K.Sh.100,000 plus $10,000 contractual debt interest; and (2) C owed B K.Sh.$200,000 but no interest. A can prove in the bankruptcy for $110,000 and B for KS200,000. The bankruptcy trustee pays their claims in full on 1 July 2014, twelve months after the commencement of the bankruptcy. If there are surplus assets after the bankruptcy trustee has paid the claims of A and B in full, the bankruptcy trustee has to use the surplus to pay interest on both debts for the period from 1 July 2015 to 1 July 2014. If there is enough, and assuming that the prescribed rate is 10 percent, the bankruptcy trustee has to pay A K.Sh11,000 and B KS20,000 in post-the bankruptcy interest. Assume that the bankruptcy trustee has a surplus of only K.Sh15,500. In that case A and B share pro rata, so that A is paid K.Sh5,500 in post-the bankruptcy interest, and B is paid $10,000.

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Disclaimer: This document is not to be taken as legal advise.

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