Probate and Bankruptcy
Probate is a legal process that validates and authenticates the estate of a deceased person. This process requires will or sometimes will isn’t needed. If a person died during bankruptcy is going on then estate takes the charge of the case.
Bankruptcy is a term that is used when an individual or business has so much debt on them that they file a petition to U.S bankruptcy court to help them erasing their debt. During bankruptcy, the court assesses the assets of the petitioner as the petitioner is unable to pay its debts.
Then the petitioner will liquidate their assets or join a repayment plan with the help of an economic advisor to pay off all the debts.
When a person is going through serious financial changes then he has the right to file for bankruptcy that can help him to regain control of life. After filing for bankruptcy, creditors lose the chance for calling, writing or taking any steps to recover the debt.
All of your possession’s including home would become a part of bankruptcy once you file for bankruptcy. Because you have shielded under bankruptcy protection, neither you can sell your house without permission nor your creditors can foreclose on your property
However, for selling your home to satiate your needs and debts only a trustee can ask the court for permission to sell the home.
If one wants to dispose of a house, then he needs to file a motion to sell real property with the bankruptcy court. Names of creditors with liens on the property and all particular.
There are nine chapters of the bankruptcy code but they are numbered as 1 to 9. So, an individual claiming bankruptcy will file under chapter 7 or chapter 13.
- Chapter 7 of the bankruptcy code relieves the debater through liquidation of their assets to pay back creditors.
- Chapter 13 of the bankruptcy code provides relief through adjusted debts and a payment plan that help the debtor to pay back in a time span of about 3 to 5 years.
When a creditor will meet all their bankruptcy filing requirements, the court will issue a bankruptcy discharge.
Effect of Bankruptcy on Inheritance
Bankruptcy can affect inheritance as long as the debtor inherits property or money while they are in bankruptcy.
A bankruptcy estate is created when an individual file for bankruptcy. The estate is controlled by the bankruptcy court and bankruptcy trustee.
If a person files the case under chapter 7 where the assets are sold to pay the debt, then the inheritance is lumped into the process.
So how inheritance is going to be affected depends upon under which chapter an individual is going to file his case.
Effect of Bankruptcy on an Estate Plan
What will happen to your property after you will pass away entirely depends on how many debts you have accrued. So, after your death, your debt will be paid off first before transferring your property or inheritance to your beneficiaries.
According to chapter 7, after your death, your assets will be liquidated in order to pay off your debts. Then beneficiaries will get the remaining inheritance.
According to chapter 13, the process gets complex as the debtor will actively participate in all the proceedings by making payments for years. (information taken from LawDepot)
When going through the process of bankruptcy don’t forget to ask questions to the bankruptcy estate trustees. Work with your trustee as a team so that you can go smoothly through the process.