In the event that a loved one who was filing for Chapter 13 bankruptcy dies, his or her estate could be charged with legally resolving the case before any assets are distributed. If the estate is not properly handled, creditors could take legal action against the estate to recover payment for the deceased's debts. If you are in charge of handling the estate, here are your options.
Change the Filing
As the executor, you can request that the original Chapter 13 filing be converted to a Chapter 7 bankruptcy. The argument for the change would be due to the death of your loved one, the estate is no longer able to make payments to the trustee for a repayment plan.
Whether or not this is allowed is dependent on the court. If a judge does allow it, the secured debts in the case will be discharged and the estate will no longer be responsible for them. Secured debts refer to those which are secured with collateral, such as the deceased's home and car. This is an option if your loved one was in the early stages of the process and had not had the case finalized through the courts yet.
Request a Discharge
If the court had already accepted your loved one's repayment plan and he or she was already making payments, you can ask for a discharge. The discharge request would be based on the fact that your loved one is now deceased. In order to receive approval, you have to show that making the remaining payments would cause an undue hardship for the estate. If the judge grants the discharge, the estate is no longer responsible for any debts that were being paid out through the repayment plan.
Request a Dismissal
Your bankruptcy attorney might also recommend that you request a dismissal of the bankruptcy filing altogether. If the judge grants the estate's request, you do not have to worry about making payments through the repayment plan to creditors. However, it is important to note that your loved one's creditors are once again able to pursue legal action against the estate to seek repayment for debts.
Depending on the state in which you live, there might be other options available for handling your loved one's bankruptcy filing. Talk to an attorney (like Flippin Thomas C) about those options and to find out which one best fits your situation so that you are able to settle your loved one's final affairs.
