Can an Estate File Bankruptcy?

Can an Estate File Bankruptcy?

In this article, we’ll discuss the important topic of: “Can an Estate File Bankruptcy?”

To clearly understand, whether or not your estate can file for bankruptcy, we must understand a few basics before we delve deeper into the subject. It’s a common concern with most of us who have either lost a relative themselves or somebody they know of, has. 

If an estate left to you, by a deceased relative in the immediate family, is worth way less than the debt he owes, it is a problematic matter to deal with. Keeping to the seriousness of the issue, the following study may help in such issues.  

Can an Estate File Bankruptcy?

God forbid such a circumstance should be faced by anyone ever. Still, as we can’t even control situations like this, we should be aware of the fundamentals of bankruptcy and related formalities. 

This issue does raise a lot of questions as to if it’s even fair to hold the immediate heirs responsible for the repayment of the deceased’s debt and if it is, how to make the process smooth for them. An estate cannot file for bankruptcy. It doesn’t matter how large your estate is, even if it is massive worth of property, countless jewels, and other deposits, but is still not as much, to pay off your outstanding debts, your right on any single asset will be seized. 

Your estate does not remain yours anymore with the amount of debt; it owes its creditors. It affects your ownership rights on the estate, and you might experience a particularly rough time around now. 

A little about cases of solvent and insolvent estates- The primary difference between the two is, one is an estate that has enough cash to pay off the debts, the other is an estate which is valued much lesser than the amount of debt, it owes.  

Basic Bankruptcy Understanding

As we all know, it’s a dire circumstance with anyone who’s struggling to meet any debt obligations and wants to be relieved somehow. In which case, they take one of the two following steps: 

  • Filing bankruptcy under Chapter 7 which will forgive their entire debt  
  • Filing bankruptcy under Chapter 13 which will allow them a fair reduction in whatever they owe.  

About Estates and Wills

Since we have heard the two terms often, we may very well understand that Wills and Estates have everything to do with the allocation of the deceased’s assets and belongings in the family. Defining the two below for better understanding:  

  • Estates: An estate is regarded as the property of a deceased individual which is left to his surviving heirs to be looked over. The property includes everything from personal belongings to bank accounts 
  • Wills: A will is a document that states all about the distribution of the deceased’s assets and legally approved by him before death.  

About Probate

The process of probate oversees a fair distribution of the entire estate in lines with the terms stated in the will. It ensures the following: 

  • Terms of the will are being followed 
  • Estate related disputes are dealt with 
  • The executor is given charge of looking over the smooth delivery of the estate 

Bankruptcy and Estates

The two terms Bankruptcy and Estates are concepts with their unique individual importance but somehow also co-related if looked at closely. 

  • The probate court shall wield its authority to sell off the estate’s assets in case of substantial unpaid bills and payments.  
  • If the debts are higher than the value of an estate, the court will forgive all the debt just like bankruptcy court  
  • Heirs may not be left with any property to own after the deceased 

Role of The Probate Process

The probate process acts as the intermediary between the executor and the heirs of the family.  

  • It ensures that no dispute should arise as court proceedings will be fair to all 
  • It will sell off all the assets of the estate if the debt exceeds the estate value 
  • It will only support surviving heirs and save them from paying any unaccounted-for bills.  

Can Chapter 13 take my inheritance?

It is generally the case that, after 180 days, according to Chapter 13, the debtors get to keep the inheritances, with a significant reduction in the repayment of their debts. Though, it’s best to inquire about the rules, with the bankruptcy attorney in your area. 

What should one do with the inherited money?

It’s great if you can put your inheritance money in rightful places. Doing that might even help reduce your frivolous expenses if you choose to spend wisely. It might improve your cash flow and balance your costs even so well.  


Can an estate file bankruptcy? You can proudly say you can answer this question backed up by the information provided in this article. As you can tell, it has been a fair compilation of bankruptcy-related basics we needed to know and understand. If you are going for formal court proceedings concerning the issue that’s been discussed above, this bunch of information might come in handy and help you choose your way forward. 

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Discolsure: I am not a financial expert and it is highly recommended that you seek out a professional before making any financial decisions. Articles are informational and for educational purposes only.

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