What Happens To Unpaid Bills During Probate

What Happens To Unpaid Bills During Probate

When a family member dies all of a sudden, have you wondered what would happen to their debts. A lot of people think that they will have to pay from their pocket to pay off their family members debts. We have seen many people fall for such a scenario during the probate process.

An individual will have many unpaid debts during their lifetimes. You go through education loans, mortgages, or any other credit facility, every human is destined to have obligations in their life’s, unless if you are rich. 

What Is Probate?

Before we get into seeing what happens to someone’s debt when they die, we will look at the probate process. It is a legal process, where the executor presents the dead person estate to the court. Then the executor will use the estate to pay off the liabilities of the deceased. The remaining part of the estate then gets transferred to the family. Now that we have a good understanding of the probate process let us dive into the liabilities issue.

Probate Process: What Happens To A Deceased Debts

So, the good thing is that you do not have to pay for someone else’s debts, unless if you are the co-owner. In most of the cases, an individual’s estate will cover all the obligations of the deceased. When the person is the executor of an estate, they are responsible for paying the creditors. Again, the executor does not pay using their own money. Instead, the court mandates that you should pay all debts only using the estate’s funds.

There are cases where the debts of individuals are far more than what they own. In such cases, the executor uses most, or all of the estate to pay off the valid claims. If there is no money left in the estate, the creditors will have to consider the debts as bad debts. During the probate process, the executor cannot use any assets put under any trust.

Probate Process: Validating The Claims

When a person dies, the court mandates that you should put a notification out on the newspaper. This is done so that the creditors can apply for a claim. What happens is that some creditors give away money without any collateral. One example is credit cards, which is an unsecured loan. 

In most of the probate cases, credit cards companies try to get a claim on a deceased estate. An executor should be vigilant and should know that they are not liable to pay off such loans. Therefore, as an executor, you need to understand the nature of such claims. An executor should only pay off any debts that have an underlying asset. There are many more such cases, and hence if the executor cannot identify such claims, it is best to hire a probate lawyer. 

How To Pay Off The Debts After Death

Once you have identified all the valid claims, it is time to make the payments. Before entering into the estate’s funds, you should first try and determine which debts are insured. Nowadays, a person guarantees most of their loans, and this may be true in your case. Therefore, you need to try and understand the insurance policy, only then can you use this money to pay off any of the liabilities. Once the money from the estate depletes, you can tap onto the estate’s funds. 

If there is no insurance, then you only have one choice, and that is to utilize the estate. Again, we keep mentioning this, and you do not have to pay anything from yours or the family members pockets. As an executor, you should also pay the loans in order of priority. There is a specific order to pay off the loans, such as you should pay all the secured loans first. In case if you are not familiar with all such terms and rules, it would be best to hire and consult with a probate lawyer.

Conclusion

We have seen that a probate case can never be straightforward. Most of the time, it will always be complicated and confusing. That is why a probate case is never easy for an executor to take care of everything. We recommend that you should take help from experts and hire a probate lawyer. When dealing with debts, they will help you identify the valid claims. They will likewise ensure that you don’t succumb to any snares during the probate cycle. In short, with their help, the whole process will go smoothly without any significant problems.

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