People file a bankruptcy in New Jersey to get a fresh start, but what if the debtor dies after the bankruptcy is filed? Is the fresh start lost? In short, no. The bankruptcy court rules allow a chapter 7 to continue if the debtor or debtors die after it is filed.
Unfortunately, the rules state that it continues, whether you want it to or not. A chapter 7 "shall be administered and the case concluded in the same manner, so far as possible, as though the death or incompetency had not occurred." In essence, it must continue, even if the spouse's family would rather it not. There is no choice.
Is This Necessarily a Bad Thing?
However, continuing the bankruptcy can make the administration of the estate simpler and cheaper. The executor need not pay the debts of the estate that are discharged and, where the trustee does not sell the debtor's assets (which is true in most cases, where exemptions cover the value of all assets), is free to distribute said assets to the heirs at the close of the case.
What Should I Do?
The decision of whether to continue a NJ bankruptcy should only be made after consulting with an attorney. Often times, there can be issues of state inheritance laws that can come into play.
If you live in southern New Jersey and have this situation, or if you are just thinking about filing bankruptcy, please call my office at 856-432-4113 or contact me through this site to schedule a consultation to discuss your situation.