What Happens if a Debtor Dies During Bankruptcy Proceedings?
The loss of one’s life is tragic for all family members involved. Along with tragedy and strong emotions comes the reality of legal issues that may survive a debtor in the midst of Chapter 7 or Chapter 13 bankruptcy. If you are an heir or successor in interest to your loved one’s estate, then you will need to be aware of what happens to debts when a debtor dies during bankruptcy. While such debts are not automatically passed on to heirs (unless the debt at issue is joint debt between the deceased debtor and the heir), it is important to be aware that creditors will likely seek assets from the deceased debtor’s estate to sell and satisfy as much debt as possible. This in turn could reduce the amount of assets and other property available in a loved one’s estate that can be passed on to heirs.
How Death Affects Chapter 7 Bankruptcy
When a debtor dies during bankruptcy proceedings, the bankruptcy case is not automatically closed and debts are not automatically discharged, whether the debtor had filed for Chapter 7 or Chapter 13 bankruptcy. However, if a debtor involved in Chapter 7 bankruptcy proceedings dies, this will not have a significant impact on the progress of the bankruptcy proceedings, as the bankruptcy trustee is in charge of liquidating all available assets in order to satisfy creditors. Thus, the process would continue as it normally would as if the debtor is alive. It is important to keep in mind that creditors may still look to the debtor’s estate to satisfy any remaining debt.
How Death Affects Chapter 13 Bankruptcy
The death of a debtor involved in Chapter 13 bankruptcy has a much greater impact than it does with Chapter 7 proceedings. The debtor’s participation in Chapter 13 bankruptcy is essential to effectively eliminating debt, as the debtor is obligated to pay off the debt through an approved repayment plan. If the debtor dies, the administrator or personal representative of the debtor’s estate must decide how the Chapter 13 case will proceed. Options include, but may not be limited to, dismissal of the Chapter 13 case, requesting a hardship discharge that wipes out all remaining debt, requesting a conversion from Chapter 13 to Chapter 7 bankruptcy, or continuing the Chapter 13 bankruptcy case. If the case is dismissed and there is still debt that has not been discharged, creditors will likely seek assets from the debtor’s estate to satisfy the remaining debt.
Contact The Law Offices of Georgette Miller and Associates, P.C. Today
The bankruptcy process is confusing enough, but when a debtor dies during the pendency of the bankruptcy proceedings, this can make an already confusing situation even more complicated. Whether you have recently lost a loved one who died during bankruptcy proceedings, or you would like to know what happens when a debtor dies during bankruptcy proceedings, you should consider speaking with a skilled Bankruptcy Attorney as soon as possible. While the death of a debtor raises estate and potential probate matters, understanding the bankruptcy portion of the process is essential to a smooth resolution of bankruptcy matters. The Bankruptcy Attorneys of the Law Offices of Georgette Miller and Associates, P.C. can answer any questions you may have as well as address your concerns regarding your or a loved one’s bankruptcy proceedings. The Law Offices of Georgette Miller and Associates, P.C. has offices located in Philadelphia, PA, New York, New Jersey, Washington, D.C., and Baltimore, MD. If you would like to speak with one of our Bankruptcy Attorneys, contact us today to schedule an initial consultation by calling (866) 96-GMLAW.