When an individual dies, the probate court in his county takes possession of his estate. The will's executor then works with the probate court to distribute the estate according to the deceased's wishes and state law. Before friends and family members receive their inheritance, the executor must use proceeds from the estate to pay off any outstanding debts the deceased left behind. Any assets left over belong to the deceased's loved ones and any other beneficiaries named in the will.
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The executor must notify as many creditors as possible of the deceased's death. Doing so allows creditors to file timely claims with the probate court and receive payment. State laws vary regarding what constitutes sufficient notification. In Georgia, for example, the executor, or “personal representative,” must run a newspaper ad announcing the open probate case for four consecutive weeks. Once this requirement has been met, the time frame for creditor claims goes into effect.
After receiving notification of the open probate case, a creditor has a limited amount of time to file a payment claim. The time frame varies by state. In Washington, for example, creditors have four months to file a payment claim if the executor ran a newspaper ad announcing the open probate case. If the executor did not run a newspaper ad, creditors have 24 months to file a claim. Once the time period for creditor claims expires, the probate court will begin distributing the deceased's remaining assets in accordance with her wishes.
Preventing Financial Loss
Local creditors are more likely to see a newspaper probate notice than large, out-of-state creditors, such as credit card companies and collection agencies. If a creditor misses the window of opportunity for filing a payment claim, it often does not receive payment at all. Thus, some creditors use computer software that regularly scans probate court records around the country. The software notifies the company should a death record or probate case match account information the creditor has on file for a debtor. This helps prevent late claims and financial loss for the company.
Not all debts a deceased individual leaves behind are the probate court's responsibility. Any debt that the deceased shared equally with an individual who is still living becomes the full responsibility of the surviving account holder. For example, if the deceased shared a joint credit card account with his wife, his wife becomes responsible for paying the debt after his death. This is true even if the deceased – not his wife – incurred all of the debt.
Collection After Probate
If the deceased's estate did not contain enough assets to cover his debts, or a creditor failed to file a claim within the probate court's required time frame, the court will not pay the debt. Creditors may demand payment from the deceased's loved ones when the probate court fails to pay the debt. Unfortunately, many individuals do not realize they are not legally liable for their loved one's debts. The Fair Debt Collection Practices Act forbids creditors from misleading consumers or threatening to take illegal action – such as suing a person the creditor cannot legally sue – when attempting to collect debts. The deceased's family members have the right to seek legal recourse against any creditor that uses abusive, threatening or illegal collection tactics.
References & Resources
- Oregon State Bar: What Is Probate?
- Judicial Branch of Georgia: Duties of Personal Representatives of Decedents' Estates in Georgia
- Washington State Probate: Washington Probate Instructions
- The New York Times: You're Dead? That Won't Stop the Debt Collector
- Power to Change: Inheriting Debts
- Federal Trade Commission: The Fair Debt Collection Practices Act (Section 807,813/ p. 8,9, 13-15)
- Ostroff Injury Law: How to Handle an Estate
- AARP: Debts After Death – Are You Responsible for a Relative's Unpaid Bills?
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