Thinking about death is unpleasant and morbid for many, but planning for the future is essential to protecting your assets while providing for your loved ones. However, if you are in the process of filing bankruptcy and you pass, understanding what will happen to your will and estate is essential. Though it can seem impossible to plan for these events in the future, familiarizing yourself with the process can help you understand how this process will impact your estate plan. Keep reading to learn more and discover how a Woodland Hills, California estate planning attorney can help you navigate the process.
What Is Bankruptcy?
Bankruptcy is a process in which a debtor is in so much debt that the United States Bankruptcy Court will absolve their debt. Generally, your assets will be liquidated, and you will either pay off a lump sum or create a repayment plan to pay off some of the debt. Whatever is remaining is absolved.
There are two standard forms of bankruptcy – Chapter 7 and Chapter 13. Chapter 7 bankruptcy is a more straightforward approach, which involves liquidating your assets and immediately paying off a significant portion of your debt before the rest is forgiven. However, this form will stay on your credit report for ten years. Chapter 13 can be more complex, as it involves creating a repayment plan to keep your assets. However, payment plans can be tough to pay off, but it only lasts on your record for seven years.
How Does It Affect Estate Plans?
If you are in the midst of filing bankruptcy and you pass away, understanding how your assets will be handled is essential. Generally, during a Chapter 7 filing, your assets will be liquidated, and your creditors will receive payments as usual. Whatever remains after will be distributed to your beneficiaries.
Passing away during Chapter 13 bankruptcy can be much more complex. Because you were on a three-to-five-year repayment plan, your debt will not be absolved due to death. Your estate is still responsible for paying off the debt incurred. However, your estate administrators have options, as they can petition the court to dismiss the case, receive a hardship discharge, or convert the case to a Chapter 7 bankruptcy.
How Can an Attorney Help?
If you’re the trustee or executor of an estate and the creator passes away, ensuring you contact an estate attorney as soon as possible is essential. It can be challenging to navigate this process by yourself, so hiring an attorney familiar with estate law is essential.
At the Law Offices of Yacoba Ann Feldman, we have the experience necessary to help you during this overwhelming time. Not only are you mourning the loss of your loved one, but you’ll also have to bear the burden of navigating a bankruptcy claim while managing an estate. Luckily, we can help. Contact us today to discuss the details of your case with our dedicated legal team.