Interruption in Bankruptcy

When you are handling bankruptcy, it anyway will feel like an overwhelming experience for you. Hence, the last thing that you will want to worry about is what can happen if the bankruptcy is interrupted or remains incomplete. Life is unpredictable. You must have thought before to stay afloat with the right financial plans. But now, for some reason or the other, you are filing for bankruptcy. But what if suddenly something happens to you? What does happen to bankruptcy if the debtors die? Do those debts get inherited? Do they disappear? Is there any rule that can change the whole thing? How should the living spouse, kids, or partners handle the consequences and financial affairs when the debtor has passed away?

Our Pittsburgh bankruptcy lawyer helps you understand the consequences of a sudden interruption in bankruptcy. Take a look.

Death and Bankruptcy

No matter whether you are filing for Chapter 7 or chapter 13 bankruptcy, the death of the debtor can have some general effects on both.

  • The death of the debtor doesn’t end a bankruptcy process. It continues. But the terms will be reassessed keeping the changed situation in mind.
  • Heirs don’t have to take care of the debts automatically. They can keep the exempt assets. But the creditor might pursue the estate to fulfill their debt requirements and that can have effects on property inheritance.

However, you need to keep in mind that if the debtor dies in the middle of the bankruptcy process, how the debt will be handled by the court and the survivors depends on the chapter of bankruptcy you are filing for.

Different Effects for Chapter 13 and Chapter 7

If the debtor dies suddenly, the chapter 7 bankruptcy mostly remains unchanged. In this case, the trustee takes care of the assets and paying the creditors. This can be taken care of without any input from the debtor.

For chapter 13 bankruptcy, things are a bit tricky. In this case, the debtor is responsible to make the payments to the trustee according to the repayment plan on a monthly basis. Now, this process will go on for three to five years. If the debtor dies, the case can be dismissed. That is why a new course of action gets determined in this case. This can include the following options:

  • Continuation under chapter 13
  • Converting from Chapter 13 to chapter 7 bankruptcy
  • The case can be dismissed. This can be tricky again as the family is not supposed to make the payment to the trustee anymore. But the creditor can still go after the estate for getting their money back.
  • The spouse of the debtor can appeal to the court for hardship dismissal which will prevent the creditor pursue the spouse and the family further for getting their money back

However, in your unique situation, you need to consult our Pittsburgh bankruptcy lawyer from Pittsburgh Bankruptcy Law Group to understand what consequences you are going to face.

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