28 Oct What Happens When a Chapter 13 Debtor Dies?
My bankruptcy client, Sharon, died after fighting breast cancer valiantly for two years. What happens to her bankruptcy case now?
She was a debtor in chapter 13 bankruptcy paying back her debts, mostly credit cards, as best she could. She paid her plan payments faithfully until the end.
Her husband called me and asked what would happen to Sharon’s debts now that she is gone. He had not signed the credit card contracts nor used the cards. He is not an authorized user of the accounts. He is not liable for the debts before or after Sharon’s death under Kansas law. He does not inherit her contracts.
The bankruptcy law says the chapter 13 case could be dismissed when a debtor dies or it can be continued by an interested party or it can be converted to a chapter 7 case. Dismissal is most common.
Sharon’s property, a house, car, retirement plan and bank account, passed to her husband automatically when she died. No probate proceeding is required or planned. Sharon’s husband is liable for her necesssities under Kansas law, but fortunately, she had great health insurance and he is left with small medical debts he can afford to pay.
Instead of allowing the chapter 13 case to be dismissed for nonpayment, Sharon’s husband decided to apply for a hardship discharge of Sharon’s debts. That option saves him the harrassment by creditors trying to collect Sharon’s debts after the bankruptcy case is dismissed and gives him peace of mind.
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