Of course not, how can s/he? But more precisely, can a dead person’s estate file for bankruptcy as a debtor? Under the US Bankruptcy Code, the answer is no. But what happens when the debtor dies during a pending New Jersey bankruptcy case? First, there needs to be someone to act in the dead person’s place, and that means that the surviving spouse or next of kin needs to apply to the county surrogate for letters testamentary or letters of administration so that s/he is appointed as executor or administrator of the decedent.
In a Chapter 7 consumer bankruptcy case, the death of the debtor does not affect the case so long as the executor or administrator of the estate steps in to perform and complete the obligations of the debtor under the US Bankruptcy Code so that a discharge may be entered.
In a Chapter 13 bankruptcy, the executor or administrator has the option of seeking the dismissal of the case, or continuing with the payment plan. Be mindful that the debtor’s income may be necessary to continue the payments so that the plan may not be able to be completed. But there are many other circumstances in which a Chapter 13 case may proceed post mortem, such as where the sale of real estate needs to be completed in order to pay the debts of the estate.
In all such cases, the court will evaluate the best interests of the parties. The executor or administrator needs to file a motion with the court in order to be permitted to act on behalf of the estate. It is also possible for the estate to seek a hardship discharge from the court if it is not feasible to continue Chapter 13 plan payments after the debtor’s death.
On a similar note, New Jersey bankruptcy law permits an infant or incapacitated person (the principal) to file a bankruptcy petition through his or her attorney in fact holding a valid power of attorney or letters of guardianship. However, it should be noted that under New Jersey law, a power of attorney becomes null and void upon the death of the principal. In such case, the surviving spouse or next of kin would need to obtain letters from the surrogate as outlined above, and seek court approval to act on behalf of the decedent.
Please note that each situation is factually different and it is essential for you to consult experienced New Jersey bankruptcy counsel for your case.