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Should I File?

Can a Bankruptcy Continue After the Debtor's Death?

When it comes to bankruptcy, there are a lot of uncertainties or ambiguities. It is essential that you have an experienced bankruptcy attorney on your side whenever you choose to file so that you can avoid confusing and frustrating hang-ups. One confusing bankruptcy difficulty occurs when a debtor dies. Just because a debtor passes away doesn’t mean that the case is closed.

In fact, the Bankruptcy Code permits that Chapter 7 and Chapter 13 bankruptcies can continue after the death of the debtor. The Federal Rule of bankruptcy Procedure 1016 says that in a Chapter 7 case, the bankruptcy will be continued in the same manner as if the death had not occurred. This means that the heirs will then have to deal with the bankruptcy proceedings.

In a Chapter 13, the case will continue as long as it is in the best interest of all parties involved. A Chapter 13 is a reorganization process which will in turn help the debtors to reduce the amount of money owed. For heirs who would inherit the debt anyway, it may be best to continue restructuring expenses and creating a repayment plan. These repayment plans may facilitate debt elimination and allow the family to keep a house that was in jeopardy or refinance so that they can pay off a home loan.

Sometimes, a Chapter 7 bankruptcy will merit a discharge. This can be a huge benefit to the heirs of an estate because it means that they won’t have to pay specific debts that were originally owed. Some debts may be specifically based on the previous debtor’s income, and these will be canceled when the debtor is deceased and therefore not earning an income any more. Talk to an attorney to get more information about continuing a bankruptcy once the filer is deceased.