- Death can affect bankruptcy proceedings.money money money image by Arman Zhenikeyev from Fotolia.com
The federal Insolvency and Bankruptcy Act governs Canadian bankruptcy with the goal of providing a new start to people burdened with debt, who cannot meet their obligations. The death of someone during the bankruptcy period can have implications on payment of debt owed and eligible assets. - Bankruptcy protection allows the petitioner a certain amount of assets to be exempt from seizure by the government to pay the bankruptcy debt. If a relative or friend dies during the bankruptcy period, then the debtor's inheritance can be used to pay off the debt unless it is considered exempt.
- If the debtor dies during the bankruptcy proceedings, the bankruptcy proceedings stop. Creditors can't touch any life-Insurance money provided to spouses and children of the deceased debtor
- If a friend or relative of the debtor dies during the bankruptcy process, then any money owed to the debtor can be used to pay debts and is not exempt since it is a monetary award. If the person dies soon after completion of the bankruptcy, then the money cannot be used for payment of debts.
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