Continuation of Chapter 13 Postmortem: Why Courts Should Allow Deceased Debtors' Cases to Continue Post Plan Confirmation
A lack of direct guidance from Rule 1016 of the Federal Rules of Bankruptcy Procedure has created inconsistency among bankruptcy courts regarding whether to continue a chapter 13 case if the debtor dies post plan confirmation but before discharge. Rule 1016 allows a deceased debtor’s chapter 13 case to continue if “further administration is possible” and it is “in the best interests of the parties.” Although dismissal is appropriate if the debtor dies before plan confirmation, continuation after plan confirmation is possible and benefits all parties. The benefits of continuation post plan confirmation stem from the certainty under federal bankruptcy law regarding what pre-petition creditors will receive and allows beneficiaries and post-petition creditors to have access to the decedent’s assets in probate, rather than all three parties fighting over the decedent’s assets in probate. Continuation of the bankruptcy case results in creditors receiving their expected distribution amount under the confirmed payment plan (through continued plan payments made by the decedent’s beneficiaries) or unsecured creditors receiving at least as much as they would have received under chapter 7 (through conversion to chapter 7). A hardship discharge may also be warranted if the decedent’s unsecured creditors have already received at least as much as they would have under chapter 7. Courts should permit continuation of the bankruptcy case and ultimately award a discharge if a chapter 13 debtor dies post plan confirmation because it will create uniformity among bankruptcy courts, equitable treatment among chapter 13 and chapter 7 debtors, and more certainty to both the decedent’s beneficiaries and her creditors.
Alexandra R. Byrne,
Continuation of Chapter 13 Postmortem: Why Courts Should Allow Deceased Debtors' Cases to Continue Post Plan Confirmation,
Emory Bankr. Dev. J.
Available at: https://scholarlycommons.law.emory.edu/ebdj/vol37/iss2/6