楊清泉 - DOES DEBTOR’S DEATH AFFECT BANKRUPTCY? PART 1

Let’s say you file a bankruptcy today, then, two weeks from now, you die. What happens to your bankruptcy? Two clients of mine this year died on me after their cases were filed. The first client died on the day after we filed her Chapter 7 case. The second client died two weeks after we filed his joint Chapter 7 case. In a Chapter 7 case, the trustee is required to continue the case to discharge. However, in a Chapter 13 case, the death of the debtor poses a different set of legal problems, because unlike a Chapter 7 case liquidation, a Chapter 13 case involves a reorganization of the financial affairs of the debtor.

The first thing that must be done is to notify the trustee, and other parties in interest promptly of debtor’s death. In Re Vetter, the Chapter 13 debtor died less than one month after the plan was confirmed. This is what happens when the plan payment is much more than what the debtor can bear. Sometimes this is referred to as death by Chapter 13. On November 17, 2011, a representative of the debtor’s probate estate, with the assistance of the debtor’s counsel, filed a notice of conversion from Chapter 13 to Chapter 7. The US Trustee subsequently learned of the debtor’s death. “Although the debtor died during the Chapter 13 portion of the case following confirmation of the debtor’s plan, the debtor’s counsel made no request to the Court for the debtor’s duties personal probate estate representative to assume debtor’s duties under the Bankruptcy Code. So, this is the second thing that must be done. It further appears that creditors, the Chapter 13 trustee, and other parties in interest were not provided notice of the debtor’s death. The only suggestion that the debtor died is the purported signature on the notice of conversion by an individual indentified as the debtor’s probate estate representative,” the court said. The UST moved to dismiss the Chapter 7 case for cause on the basis that there was no authority to convert the case to Chapter 7, and that the deceased debtor was not eligible for Chapter 7 relief.