Can an Estate Executor File for Bankruptcy in Alabama?

Can an Estate Executor File for Bankruptcy in Alabama?

When a person creates an estate plan, they typically appoint an executor as well. This is a person who is tasked with the job of administering the estate when the time comes. In completing these tasks, it is possible for the executor to experience some difficulties. One of these may be if the individual passed away with certain debts. When this happens, they may wonder if it is possible to file for bankruptcy on behalf of the estate. To learn more, continue reading below and speak with an experienced Alabama estate planning attorney.

Can an Executor File for Bankruptcy?

A person’s property belongs to their estate when they die. This includes personal property, real property, tangible assets, intangible assets, and debts. Generally, assets are meant to go to any beneficiaries that are designated within the estate plan. However, this can sometimes change. An example can be if the deceased was in debt at the time of their death. This can leave loved ones to wonder if bankruptcy can be filed to prevent losing certain assets. 

Bankruptcy Code 11 U.S.C. Section 109 states that only an “individual” can file a Chapter 13 Bankruptcy case. This means that an estate cannot file for bankruptcy, therefore an executor cannot. After the death, creditors can file claims with the court regarding what they are owed from the estate. If the assets exceed the amount that is owed in debt, beneficiaries can inherit what is leftover. On the other hand, if the debts exceed the assets, the assets can be liquidated to pay off the debt. After this happens, the remaining debt can be written off and the beneficiaries will not have anything to inherit. This makes it unnecessary to file for bankruptcy. 

While this is true, it is possible for a beneficiary to save a certain piece of property. If a beneficiary was meant to inherit a property that is subject to a mortgage and a foreclosure, they may be able to file for bankruptcy to stop the foreclosure. This can only be done as long as they would have otherwise been eligible to file for Chapter 13 on their own.

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Stone Crosby, P.C. has proudly served clients in Alabama for over 100 years. Our firm has experience handling matters including divorce and family law, estate planning and administration, business law, employment law, class actions, consumer protection, business law, real estate law, among many others. If you require quality legal representation, contact our firm today to schedule a consultation.

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