Can a dead person be bankrupt?

03 Feb Can a dead person be bankrupt?

We recently filed a chapter 13 case for a married couple. Suddenly and tragically, the husband died. What could we do?

Well, it turns out to be not so simple.

Married People Filing Jointly Really are Two Cases with One Bankruptcy Case Number

Most of the time, married couples think of themselves as filing just one case. Actually, they are filing two cases which are treated as one. Most of the time, this makes no difference. When our chapter 13 debtor passed away, however, we had some choices to make for the surviving widow.

Bankruptcy can discharge debts due as of the date of filing of the case

Naturally, our clients incurred a lot of medical expenses in the final illness of the husband. In Illinois, the family medical expense doctrine suggests that these could be the debts of the surviving wife. But these debts weren’t due when the couple filed their chapter 13. So, we allowed the chapter 13 to be dismissed as to the wife only. Since she didn’t get a discharge in bankruptcy in chapter 13, she can file a new chapter 7 case and now discharge the new medical debts for which she might be liable. Her husband has passed away and has not had income lately, so the means test won’t be an issue.

The deceased debtor’s case can be converted to a case under chapter 7.

Even though the husband and wife originally filed their case as a joint case, their cases can be separated. On motion of the chapter 13 trustee to dismiss the deceased debtor’s case, the widow can ask the court to convert the case to a case under chapter 7. A deceased person can’t file a bankruptcy case. That’s what probate is for. But an existing case can be dealt with in bankruptcy thus eliminating the need for any probate.

Points to remember

  • When a husband and wife file a joint case, it is really two cases with one case number
  • These cases can be jointly administered or even treated as one case for all purposes. This is called substantive consolidation
  • A bankruptcy case can continue to c0nclusion even if a debtor passes away while the case is going on.

Lakelaw files bankruptcy cases for people and businesses in Illinois and Wisconsin. Call us today at 1 866 LAKELAW (525-3529).

Related Posts Plugin for WordPress, Blogger...
The following two tabs change content below.
Jay S. Fleischman is a bankruptcy lawyer with offices in Los Angeles and New York. He can often be found on Google+ and Twitter, where he shares information about consumer protection issues and personal finance.

Sorry, the comment form is closed at this time.