What Happens If Someone Dies During Bankruptcy?

Bankruptcy is already a complicated process. However, if someone dies, then this can make the case even more complicated. Bankruptcy law stipulates how a case should be handled if a person dies during the process. The following things have to be kept in mind when dealing with bankruptcy after the death of a loved one.

Chapter 7 Bankruptcy

Death usually will not affect Chapter 7 bankruptcy. This form of bankruptcy involves liquidating someone’s assets in order to satisfy the debts. The trustee will pay the creditors using the money from the assets. That is why chapter 7 bankruptcy goes on as if the person is still living.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy is handled differently because it is a payment plan. People are supposed to make monthly payments for the next three to five years until the debt is paid off. The administrator of the person’s estate will have to decide what to do if a person dies during the process. It can be handled in one of the following ways.

Dismiss the Case

The administrator of the estate may decide to dismiss the bankruptcy case. However, this does not mean that the debt goes away. The person’s estate may still be liable to the creditors.

Get a Hardship Discharge

The administrator of the estate can request a hardship discharge. However, one has to prove that the debt that hasn’t been secured by collateral is already paid off. If the court approves a hardship discharge, then the remaining debt will be wiped out.

Convert to Chapter 7

Bankruptcy law allows you to convert chapter 13 into chapter 7. However, it is important to note that there are some courts that will not allow this. Whether your request is granted will depend on the court that is handling your case.

Continue With the Case

The administrator of the estate can opt to continue with the case. They will be responsible for making sure that all of the payments are made until the debt is covered. It will be treated as though the person did not die.

It is best for you to hire a bankruptcy attorney if you are dealing with bankruptcy after the death of the loved one. An attorney will tell you which option is best for you to move forward. If you are in need of an attorney to handle your case, then you can contact Fair Fee Legal Services.

Fair Fee Legal Services
8665 South Eastern Avenue, Suite 101 Las Vegas, NV 89123

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