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Bankruptcy Law Blog

Sunday, July 14, 2019

What Happens If Your Spouse Dies During Your Bankruptcy Case?

If you are going through the bankruptcy process and your spouse has passed away, our hearts go out to you. Both situations are difficult, so we can only imagine how hard it must be to go through them at the same time.

Below is an overview of what the bankruptcy process looks like when a filer has passed away, but it is obviously not a full explanation. If this is the situation you are in, we strongly urge you to contact a experienced Mobile bankruptcy attorney.

 

Debt and Death

The most important thing to consider when you are figuring out how to move forward after a loved one has died is that most debts die with the debtor. Creditors can attempt to get paid from a deceased debtor’s estate, but they cannot seek payment from the debtor’s heirs unless the debt was a joint debt. 

An experienced attorney is going to be able to tell you how the bankruptcy process and the estate administration process fit together in your specific case. It may be that all the debts your loved one was struggling to pay off disappear. 

If you co-signed or otherwise took on responsibility for your loved one’s debts, you may still be on the hook. 

Which Chapter Matters 

We talk a lot about the various chapters of the bankruptcy code and what filing under a specific one means, so it should come as no surprise that what happens when a filer has passed away varies based on what chapter of the bankruptcy code is in play. 

Chapter 7

If your loved one — or you and your loved one — filed for bankruptcy under Chapter 7, the bankruptcy case will probably proceed even though your spouse has died. 

In these cases, assets are sold off and the proceeds are used to pay down debts. Most of the debts that remain are then forgiven. The whole process is managed by a court-appointed bankruptcy trustee, so even if the debtor passes away, the case can proceed because the trustee is the one in control. 

Creditors will not be able to make claims against the debtor’s estate for debts that were wiped out in the bankruptcy. 

Chapter 13 

In Chapter 13 cases, debts are consolidated and the debtor(s) enter into a court-supervised repayment plan. Whether a deceased debtor’s co-signers or heirs want to stay the course depends on a lot of individual factors, including the length of time remaining in the Chapter 13 process, the amount and nature of the remaining debts, and the ability of co-signers/heirs to make Chapter 13 payments or get new financing. 

No One Size Fits All 

What is best for you and your family is going to be different from what is best for any other family, so it is very difficult to generalize. The best thing you can do is seek advice from an experienced bankruptcy attorney who has handled cases where the debtor passed away. 

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Padgett and Robertson assist clients with Bankruptcy, Personal Bankruptcy, Consumer Bankruptcy, Chapter 7 Bankruptcy, Chapter 13 Bankruptcy and The New Bankruptcy Law in Mobile, Alabama and throughout southern Alabama. Alabama State Bar Association Regulations require the following: "No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers." 11 U.S.C. 528 of the U.S. Bankruptcy Code requires the following: "We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.”



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Alabama State Bar Association Regulations require the following: "No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers." 11 U.S.C. 528 of the U.S. Bankruptcy Code requires the following: "We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.”