Estate Executors & Bankruptcy

By Heather Frances J.D.

While you are alive, you may be able to wipe away some debts by filing for bankruptcy, but the same is not true after you die. Though a case pending at the time of your death can be allowed to continue, your executor cannot start a new case on your behalf. He can, however, start a new case on his own behalf if he is also a beneficiary of your estate.

Changes at Death

Assets you own at the time of your death become an “estate” to be managed by your executor throughout the probate process. Your executor distributes assets to your beneficiaries if you have anything left at the end of probate, but he has to pay your creditors first. If you file for Chapter 7 bankruptcy before your death, your Chapter 7 bankruptcy continues as if you were still alive. However, the bankruptcy court will likely dismiss a pending Chapter 13 case though it could be allowed to continue under rare circumstances. Your executor may represent your estate’s interests in an ongoing bankruptcy proceeding since you aren’t able to represent yourself, or the bankruptcy court can appoint someone else as a representative for your bankruptcy case.

New Bankruptcy Cases

While your executor can continue an existing bankruptcy case, he cannot start a new case on your behalf or on behalf of your estate. However, probate cases often have an effect similar to bankruptcy cases when it comes to settling debts. For example, if you die owing more than you own, your executor must liquidate your assets and pay your debts according to the procedures established by your state’s laws. As in bankruptcy, debts remaining after your assets run out are written off. Neither your executor nor your beneficiaries are personally responsible for paying your debts.

File a DBA for your business online. Get Started Now

Saving Property from Foreclosure

Though your estate cannot file for bankruptcy, your executor can file in his individual capacity if he is also a beneficiary and otherwise qualifies under the bankruptcy rules. This ability is particularly handy if he stands to inherit a particular piece of property from your estate and the property is facing foreclosure. Since beneficiaries have the ability to file bankruptcy as a way to prevent foreclosure, your beneficiaries could keep the property with the help of a bankruptcy case. Without bankruptcy, your creditor could proceed with the foreclosure, causing your beneficiaries to lose the property.

Beneficiaries in Bankruptcy

Your executor can serve as your estate’s representative even if he has previously filed for bankruptcy on his own behalf, and this previous bankruptcy does not typically affect his ability to serve as executor. However, your executor’s bankruptcy – whether filed before or after your death – could affect your estate if he is a beneficiary. In such a case and depending on your court’s interpretation of existing laws, the automatic stay, or postponement, of collection actions that your executor receives by filing for bankruptcy may also apply to the assets in your estate.

File a DBA for your business online. Get Started Now
What Can I Do if the Executor of the Estate Doesn't Pay Me as an Heir?
 

References

Related articles

Can a Debt Collector Come After the Power of Attorney After a Death?

A creditor, who has lost patience with a debtor, may bring in a debt collector to assist him in collecting the money due. Debt collectors have a legal right to contact a debtor or an agent for the debtor acting under a financial power of attorney. Once the debtor dies, however, both these options are foreclosed.

Removal of an Executor Due to Hostility Toward Heirs

It’s usually rather difficult to have the executor of a will removed. The decedent nominated him in his will to handle his affairs, and courts tend to feel a moral duty to honor a decedent’s last wishes. However, many individuals name persons who they feel have the practical skills or business savvy to handle such a complex job, and they fail to consider their “people skills.” The chosen executor may be unable to deal with grieving or impatient heirs, or he might have a negative personal history with one of them. In either case, having him removed from office on this basis alone is generally difficult.

Can Probate Property Be Rented Out?

When you die, many of your assets may have to go through your state’s probate procedures before they can be distributed to your beneficiaries. Since this process can take several months or even years, it may be financially impractical for your property to remain unoccupied during that time. With an understanding of some simple rules of probate, your estate’s executor, or representative, may rent out property while the probate case is pending.

DBAs DBAs

Related articles

Who Enforces the Execution of a Will?

In drafting your will, you may appoint a person to serve as your executor, also known as a personal representative. ...

When Does a Testamentary Trust Will Go Through Probate?

When you die, many of your assets will have to go through probate before your estate’s representative can distribute ...

An Executor's Duties to a Beneficiary

Executors are individuals who are appointed through a will to ensure the wishes of the testator, person who created the ...

What Happens if an Executor Refuses to Probate?

An executor has a duty to act in the best interest of the estate, and refusing to probate an estate may be cause for ...

Browse by category
Ready to Begin? GET STARTED