Well, let’s talk today a little bit about what happens in the event that you filed your bankruptcy case but you’ve subsequently passed away before the bankruptcy case has actually been closed. First of all, if you’ve been able to attend your meeting of creditors hearing and then you subsequently pass away, what normally happens is that you should still receive your Chapter 7 discharge if it’s a Chapter 7 case.
In the event that you filed what’s known as a Chapter 13 case, the considerations are a little bit different. In fact, a Chapter 13 case, as you probably know, is just a repayment bankruptcy which can last anywhere from three to five years. If you’ve passed away during that time, your beneficiaries are going to have a few options. One option will, of course, ask the court to just dismiss the case and if the case is dismissed that means that any creditors could still come against and make claims against any part of your life insurance proceeds if there are any.
The other option, of course, is for your heirs to make the decision to go ahead and continue making the Chapter 13 payments until your Chapter 13 case has been concluded. A final option might be for your heirs to decide to ask that the case actually be just converted to a Chapter 7 case and then have an administrator appointed to be able to attend your meeting of creditors hearing.
Well, this brings me to a final point as far as health and that type of a thing and considerations of filing a bankruptcy case. If you’re in poor health, you may want to give strong consideration to actually filing the bankruptcy case now while you can. In the event that you have life insurance proceeds, let’s say, for example, you’ve got $100,000 of life insurance proceeds and you’ve got $50,000 worth of debt. Well, if you pass away, what will happen is this: if you’ve not filed the bankruptcy case and gotten that discharge, then any creditors, any credit card companies, or any other types of creditors that you have can go ahead and file claims against those life insurance proceeds.
What that means is that the amount due to your beneficiaries or what they’re going to be able to receive would be significantly reduced. On the other hand, if you just simply file your bankruptcy case, get rid of all of the debt, then that $100,000 of life insurance goes directly to your beneficiaries or whoever you’ve designated. Hopefully, you don’t find yourself in that situation but if you do, please call my office at 770-792-1000. Again, I’m Roger Ghai.