If you have been named in a will as the executor of an estate, or if you have been appointed by the court as a personal representative of an intestate estate (an estate without a will), and as you dove deeper into your duties, you realized that the decedent passed away, leaving behind a mountain of debt, you may be wondering, “Can I file for bankruptcy on behalf of the decedent’s estate?” If you’re wondering this, it’s a question frequently asked by personal representatives.
Can An Estate File For Bankruptcy?
Under bankruptcy code, only an individual can file for bankruptcy, and not the estate of a deceased. Even with an Administrator or Executor of the deceased cannot file for bankruptcy for the estate.
If an estate is already in probate, it cannot file bankruptcy. However, if a debtor was in the middle of Chapter 7 and they passed away, the bankruptcy case would continue and the executor would still administer the estate; this is covered under Rule 101 of the Federal Rules of Bankruptcy Procedure.
Under Rule 1016, it is possible for a decedent’s Chapter 13 to continue after the debtor passes away, it just depends on the facts of the case. So, under certain circumstances, if the decedent was in the middle of Chapter 13 before they died, the court may allow the Chapter 13 case to proceed until it is concluded as if the debtor had not passed away.
About Insolvent Estates
When people pass away, they either leave behind solvent estates, which have excess cash to pay all of their debts, or they leave behind insolvent estates, which have more debt than assets. Debtors often file bankruptcy when they have something they need to protect. If an estate has no money to pay its debts, it’s not necessary to file bankruptcy.
Essentially, if an executor or personal representative discovers that the decedent had a significant amount of debt, he or she would notify the decedent’s creditors of the death and ask them to refer all claims to the estate.