The idea here is that you got money from the debtor in preference to others. What should happen is that all debtors receive an equal percentage of any remaining available funds.

If your brother has no other assets, that £2000 has to be split with all claimants on a percentage basis. If his debt to you was 1/10 of what he owed to all combined, you’ll get to keep 1/10 of the £2000. This assumes that you can prove, in a legally-satisfactory way, that he owed you that money. There might be some other twists and turns, but that’s about it.

So you need to participate in the hearings, ideally with legal representation, in order to keep from getting screwed. In essence at least part of your brother’s indebtedness has been transferred to you. Through negotiations with the other parties, you can usually work out some sort of repayment plan.

Your only solace is that you might someday be able to guilt your brother into repaying his debt to you, while the other claimants are unlikely to ever see a fraction of what they’re owed.

That being said….

Yes they are entitled to take the money. Albeit a noble gesture, what your brother did is considered a “fraudulent preference” in as much as he favored you at the expense of the other creditors.

You will then file a proof of claim with the trustee and be pro rated along with the rest of the unsecured creditors.

Once your brother is discharged, there is nothing preventing him from settling the account with you. Usually in the UK, discharge takes 9 months to a year to happen.