I get asked the question, “What if I die before my case is completed?” You might be thinking to yourself why would it matter at all what happens as it won’t affect the deceased person. Well, these clients have often worried about these bills so long that they don’t want their heirs or loved ones having to do the same with their debt after they die. But in reality it really is a good question as a debtor’s death does have consequences for his or her survivors. Fortunately, absent a co-signing with the heir, when people die, their debts are not passed on to their heirs. The creditor, however, can still go after the property of the deceased to satisfy the debt. This can affect how much property the heirs of the deceased will receive.
Death Before Chapter 7 Discharge
If the Debtor has filed a Chapter 7 bankruptcy, the death of the Debtor usually has no effect on their Discharge, assuming they have appeared at the 341 meeting of creditors, held approximately 30 days from the filing of the case, and have already completed their Course in Financial Management. Chapter 7 bankruptcies are liquidations and the trustee is in charge of administering the bankruptcy estate and determining if there are any assets to pay creditors. Once the 341 hearing is held, the debtor is not really necessary for administration of the case from that point forward which is usually only 2 to 3 months longer. All documents that are filed in a bankruptcy petition have to be filed under oath, thus requiring the debtor to be present and alive. Most if not all documents filed in a Chapter 7 are filed at the beginning of the case. Usually nothing else is required to be filed after the 341 meeting and the trustee will just continue to administer the case as if the death never happened, usually resulting in a discharge.
Death Before Chapter 13 Discharge
A Chapter 13 bankruptcy is a different story because participation of the debtor in the case is necessary. In a Chapter 13 case, the debtor has to make monthly payments to the bankruptcy trustee for 3 to 5 years before the case is completed. Once the debtor dies, if no further payments are made to the Trustee, then the Trustee will file with Court to have the case dismissed. However, if the payments continue to be made by the heirs then the case proceeds toward discharge. The caveat being before you can receive a discharge in a Chapter 13 case, the debtor has to file a document, which has to be filed under oath and thus requires a live person. Fortunately, if the heirs want to continue paying the case they simply need to file proof that they have been appointed as either the executor/executrix or administrator/administratrix of the deceased’s estate and sign the document in that capacity for the discharge order to be signed by the Judge.
As you can see it is important to have an attorney who will carefully navigate you through the Bankruptcy process. At Bond & Botes we treat every case with care and are very diligent with our clients to make sure their case gets discharged. Please call one of our conveniently located offices to set up a private consultation with one of our experienced attorneys.
We will analyze your situation and help you make the best decision possible to help you navigate your financial problems.
Grant McNutt is a Managing Attorney at the Bond & Botes Law Offices in Florence and Haleyville, Alabama. He holds a Bachelor of Science from the University of Alabama, and a Juris Doctorate from the Birmingham School of Law. He has been practicing Consumer Bankruptcy Law since 1999. Read his full bio here.