Can I Keep My Wedding Ring in Bankruptcy?
When a family member dies, her personal assets, real estate, trusts, and her debt fall into a newly formed entity called the “decedent’s estate”. This is a loose term that does not necessarily require probate of a will or an estate of millions of dollars.
Some estates are probated, and some are not. However, those who stand to inherit from the deceased relative are called “beneficiaries” of the “estate”.
Who Can File to Stop a Foreclosure After Death
Let’s assume that a piece of real estate property is being foreclosed when the owner dies. If you are a beneficiary of the deceased’s estate, and stand to inherit all or part of the property being foreclosed, who can file a Bankruptcy on the deceased’s behalf in order to stop the foreclosure proceedings?
Under Bankruptcy Code 11 U.S.C. Section 109, only an “individual” can file a Chapter 13 Bankruptcy case. Therefore, the estate of the deceased cannot file a Bankruptcy case, and an Executor or Administrator on behalf of the decedent’s estate cannot file a Bankruptcy.
However, since beneficiaries stand to inherit the property, and the property is subject to a mortgage and a foreclosure, a beneficiary would be eligible to file a Bankruptcy case and stop a foreclosure sale (as long as that beneficiary would be otherwise eligible to file his own Chapter 13).
What the Beneficiary Route Actually Requires
It’s important to understand that the beneficiary’s eligibility to file Chapter 13 carries more weight than you may assume. Filing as a beneficiary essentially requires you to file your own bankruptcy, which means:
- The debt, income, and assets on the schedules are yours, not the estate owners
- You must meet the eligibility requirements, including the debt limits and required credit counseling
- The plan payments will come from your income for three to five years
- You need an actual interest in the property, which depends on the terms and conditions of the will or the intestacy rules and on where probate has reached
While bankruptcy is a genuine option as it does stop a sale, it is not a shortcut or workaround. You will assume the mortgage as your own, and all the issues that may accompany it.
What if Someone Dies During a Bankruptcy That Is Already Filed?
The opposite situation comes up just as often, and ultimately depends on what chapter was filed. Under the rule governing a debtor’s death, a Chapter 7 case does not abate. It carries on as though the death did not happen, so the trustee will finish administering it, and no motion is needed to keep it moving.
Chapter 11, 12, and 13 function differently. In these situations, the court may dismiss the case, or allow it to continue only if further administration is possible and represents the interests of the parties. The Advisory Committee that established this rule expected dismissal to be the likely outcome of Chapter 13, as the plan ultimately depends on income the debtor no longer has. In the event a home is at stake, you may want to ask the court to let the case continue, rather than assume it is over.
Contact Our Experienced New York Bankruptcy Law Firm
If you are in a difficult financial situation and require the services of an experienced bankruptcy attorney, contact the Law Offices of Allen A. Kolber, Esq. today to schedule a consultation and discuss your options.
