What Happens to a Will if the Creator Declares Bankruptcy in New York?

declaring bankruptcy

Planning for the future is complex and overwhelming but necessary nonetheless. However, it’s essential to remember that not everything can be taken into consideration, including what happens to your will should you declare bankruptcy. If you have considered filing for bankruptcy, understanding how it will impact your estate plan is crucial. Keep reading to learn more about this process and discover how a Putnam County estate planning attorney can help you navigate this troubling time in your life.

What Is Bankruptcy?

Bankruptcy is a complex legal process that those with an overwhelming amount of debt can initiate. This process allows debtors to receive a fresh start by providing debt relief. It is essential to understand that declaring bankruptcy does not simply absolve your debts; instead, it allows you to either liquidate your assets or create a payment plan to repay some of your debtors.

Generally, individuals will file for either chapter 7 or chapter 13 bankruptcy. Chapter 7 involves liquidating assets in order to repay collectors. This process offers a quicker turnaround time but can remain on your credit score for ten years. Chapter 13 creates a long-term repayment plan but allows you to retain your assets. This plan lasts anywhere from three to five years, but this option will only impact your credit score for seven years.

How Will It Impact an Estate Plan?

If you file for bankruptcy, understanding the impact it has on your will is crucial. When you pass away during this process, the filing does not go away. It continues, and it is up to your estate to complete the process.

Generally, chapter 7 is more straightforward, as the assets will be liquidated and paid to the creditors. Whatever remains will be distributed to your beneficiaries as usual.

However, if you pass away during chapter 13 bankruptcy, this is more complicated as you signed a contract promising to repay the debt over the course of years. This means your estate is required to continue making payments. Your executor can petition the court to get the case dismissed, relieve a hardship discharge, or transform it into chapter 7.

Can an Attorney Help?

If you have any questions about how filing for bankruptcy will impact your estate plan, contacting an attorney as soon as possible can help you make the best decision about how to proceed.

Similarly, if you’ve recently become the executor of an estate where the creator of a will was in the middle of a bankruptcy case, you’ll want to reach out to a lawyer. They can help guide you through the process to help ease the stress and anxiety this can cause.

At the Law Office of Andres D. Gil, we understand how hard it can be to plan for the future. That’s why our dedicated legal team will do everything in our power to make estate planning as simple as possible for you and your loved ones. Contact us today to learn how we can help you.

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