What Happens if a Debtor Dies During Bankruptcy?
If a debtor passes away during any type of bankruptcy filing, the proceedings can continue as if the debtor was still alive. The case does not automatically end and the debts are still owed to creditors until a discharge is granted. Only an automatic stay prevents creditors from pursuing payment from the debtor’s estate. If your loved one passes away during a bankruptcy filing, contact a Reno bankruptcy attorney for assistance.
To prevent a bankruptcy case from being dismissed, you should continue bankruptcy proceedings on behalf of the decedent. If no one testifies on behalf of the deceased, the case can be dismissed, meaning the debts are still owed. If a debtor dies during Chapter 7 bankruptcy before they have attended the First Meeting of Creditors, someone else can testify on behalf of the deceased debtor.
For a Chapter 13 bankruptcy, the court will consider is what is in the best interest of the parties involved. A judge reviews how a judgment will affect the debtor’s survivors. The bankruptcy court may decide to convert the Chapter 13 bankruptcy case into a Chapter 7 bankruptcy or to dismiss the case. Spouses of a deceased debtor can request a “hardship discharge” under a Chapter 13 filing. If you are granted a hardship discharge, creditors cannot purse debt collection. Consult with a bankruptcy attorney in Reno to decide which avenue is right for you.
Creditors may pursue the debtor’s survivors for payment if a bankruptcy case is dismissed or discontinued, even if the creditor is not legally entitled. The Darby Law Practice, Ltd. is a bankruptcy law firm devoted to upholding clients’ rights, helping them through difficult financial situations.