Should you die while in a bankruptcy, depending on what type of bankruptcy you file, your death can impact the bankruptcy in different ways.
If you were to have filed a Chapter 13 bankruptcy, then many times your estate will make the payments for the bankruptcy on your behalf, and the case will continue as normal if the judge allows it. Just as with any normal Chapter 13 bankruptcy, your case will be dismissed or “kicked out” due to non-payment, so if your estate were to fall behind, the same repercussions will apply. If that were to happen, the deceased’s estate would be responsible for their remaining debts.
If you have filed a Chapter 7 bankruptcy, most of the time, the case continues as if you were alive. Rule 1016 of the US Bankruptcy Code states, “Death or incompetency of the debtor shall not abate a liquidation case under chapter 7 of the Code. In the event that the estate shall be administered and the case concluded in the same manner, as far as possible, as though the death or incompetency had not occurred.”
However, as any matter or the law, there are loopholes and technicalities. You technically must show up to your 341 Creditors meeting and if you have passed away, obviously you cannot attend, and therefore if the judge in your case wanted to, they could dismiss your case since you did not show up. If there is a life insurance policy involved in your estate the trustee has right to take it and your family may lose out on the funds. If you are in poor health, discussing the possibility and what may happen should you pass away during your bankruptcy may be a good idea.
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