Many older Americans are burdened with high debt loads. In many situations they will leave little to their descendents, and if they’re underwater, the problem becomes more complicated. Plus, there are some situations where debtors know that they’re likely to pass away soon and would like to handle their debt problems before they die. These are tough circumstances, but if you believe you might not see the end of your bankruptcy, or if you’re filing jointly with a spouse in such a situation, or if you are a relative who may inherit the post-bankruptcy estate, there are some steps you can take to prepare yourself given the circumstances.
· For those filing in Chapter 7, the case continues all the way through discharge as though the debtor did not die. This makes sense since Chapter 7 is the straight liquidation chapter, meaning it discharges debts rather than pays them down out of the petitioner’s subsequent earnings. Instead, the petitioner’s non-exempt assets will be sold to the creditors, which aren’t affected by the petitioner’s death. The only thing to note here is that the Chapter 7 bankruptcy process concludes before any estate proceeding can distribute the remaining assets to the petitioner’s beneficiaries.
· In Chapter 13 cases, because the petitioner has died, the attorney usually voluntarily dismisses the case. Chapter 13 cases reorganize the petitioner’s debts and require him or her to make payments on them according to a repayment plan. Without the petitioner’s future income, there can be no repayment plan.
For relatives, the situation depends on their relationship to the petitioner. When the petitioner files in Chapter 7, they merely wait until the discharge occurs. In Chapter 13, though, if the relative is filing jointly with the petitioner (usually a spouse), then the steps to take are different. The joint filer can:
(1) Seek a hardship discharge if he or she does not work,
(2) Modify the repayment plan to reduce the monthly payments,
(3) Separate the cases and either dismissing the deceased petitioner’s case or discharging his or her debts via a hardship discharge. Then the surviving petitioner continues in either Chapter 13 or Chapter 7.
Death during bankruptcy is unusual, but the law deals with it adequately. It’s a situation people might encounter the longer they have underwater houses, so if you think you or your spouse will not see the end of your bankruptcy, then it’s especially important to hire an experienced Las Vegas bankruptcy attorney to help plan your case, or even to be flexible when unexpected tragedies occur.
For more questions about bankruptcy in Las Vegas, please feel free to contact an experienced Haines & Krieger Las Vegas bankruptcy attorney for a free initial consultation. Call us at 1-702-880-5554 to set up your free consultation.