A debtor’s death may throw an unexpected wrench into the works of his or her bankruptcy case. We here at The Law Office of Paul Petrillo understand that those left behind after a debtor in bankruptcy has died may be concerned about the implications such a case may have on his or her estate. If this describes your situation, then your worries may be justified. Contrary to what many may think, death does not automatically absolve one of his or her financial liabilities.
If your friend or loved one filed for a Chapter 7 bankruptcy, you likely don’t need to be worried. The bankruptcy trustee is the one responsible for liquidating all of his or her non-exempt assets. The trustee will also them handle the repayment of creditors that the sale of those assets allows, following which the case will likely be discharged.
However, a Chapter 13 bankruptcy requires that monthly debt payments be made before the case can then be discharged. In this case, you and the others linked to his or her estate typically have three options:
- Ask for a hardship discharge: Section 523(a)(8) (as shared by the Legal Information Institute) states that debts that would place undue hardship on you as a potential dependent of the debtor may be discharged. However, typically only unsecured debts are covered under this statute.
- Allow the case to be dismissed: This effectively ends the case. However, be aware that this may open the door for creditors to seek reimbursement out of the assets of the debtor’s estate.
- Convert the case to a Chapter7: If the case qualifies, this may allow for the complete discharge of debts as opposed to repayment.
You can find more information on dealing with the consequences of a bankruptcy case throughout our site.