A person creates an estate plan with the intent of passing along certain assets after their death. In doing so, many people choose to appoint an executor to handle the process of this distribution for them. The job of an executor includes various responsibilities to ensure the estate is taken care of the way the deceased intended it to be. During this time, situations may arise that lead the executor to wonder if they are allowed to file for bankruptcy on behalf of the deceased. Continue reading below to learn more and contact an experienced New York estate planning attorney for assistance.
Can an Executor File for Bankruptcy?
When a person dies, their property belongs to their estate. This includes their personal property, real property, tangible/intangible assets, and any debts they have. Assets are usually prepared to be distributed to beneficiaries of the estate. However, there are sometimes cases where this may become complicated, such as if the deceased died in debt. As a result, loved ones may wonder who can file for bankruptcy on behalf of the deceased to prevent assets from being lost.
Bankruptcy Code 11 U.S.C. Section 109 states that only an “individual” can file a Chapter 13 Bankruptcy case. This makes an estate ineligible to do so, therefore an executor cannot file for bankruptcy. When an estate is made, creditors can file a claim with the court to receive what is owed to them. If the assets exceed the debts, beneficiaries are able to receive what is leftover. However, if the debts are greater than the assets, the assets can be liquidated to pay off the debt and the remaining debts will be written off. When this happens, beneficiaries have nothing to inherit and therefore do not need to file for bankruptcy.
While this is true, it is still possible for a beneficiary to save certain property. If they are meant to inherit a property and it is subject to a mortgage and a foreclosure, they are able to file for bankruptcy in order to stop a foreclosure sale from happening. However, this can only be done as long as they would be otherwise eligible to file their own Chapter 13.
Contact our Firm
If you or a loved one needs assistance creating an estate plan and wish to speak with an experienced attorney, contact the Law Office of Andres D. Gil, PLLC today.