On average, Americans die with about $62,000 in debt.
What happens if your loved one passes away with unpaid bills? You might be worrying about how you’ll deal with unpaid debts in probate.
Keep reading to find out all you need to know about unpaid bills in probate.
How to Find Out Who They Owe?
First, you’ll want to find out what unpaid debts that your loved one had. This process can be difficult, but if you need help, you can talk with the executor or lawyer for their estate.
If you’re the executor, then you’ll have to go through their records, email, and mail. They may have kept files or records of the debt. You should also look out for bills pertaining to:
- Mortgage loans
- Credit cards
- Personal loans
- Medical charges
- Car loans
- Business loans
Finding all of this documentation will give you a better idea of what unpaid debt is out there. This way, you’ll be able to total up the amount of debt and understand the total amount owed and who the creditors are.
Who Pays the Debts?
Once you’ve found all the debt, don’t worry. It doesn’t directly pass on to any of the surviving family members. You won’t inherit their bills and debts, but the debt doesn’t just vanish either.
The burden of the debts will fall on the deceased person’s estate before it can be transferred. For example, the executor or trustee will have to use the assets to pay off any of the debt before dividing the assets between heirs.
This process is called probate. The estate can be anything including the property, valuables, assets, and cash that can be sold. The heirs will receive whatever is left over after all of the debt is paid.
In some cases, there isn’t enough money on the estate to pay off all of the debts. It still won’t pass to the family, but that means the heirs won’t receive anything either.
Keep in mind that these rules don’t apply to secured loans, mortgages, or properly filed liens. You should also know that after two years from the date of the deceased’s passing, the creditor’s claims to the state can get barred.
Will You Ever Be Responsible?
In most cases, you’ll never have to pay the debt out of your own pocket. The creditors might just end up with less money than they were owed, but the heirs won’t receive anything.
The creditors will always get paid first in probate.
There are some cases where you could end up responsible for the debts, but they are very rare. The first case is if you make a mistake while handling the estate. If you aren’t aware of the debts and distribute the inheritance before paying creditors, then you could still be held liable for those debts.
Another example where you could end up responsible is if you had also signed the loans with the deceased as a co-signer. Now that they’ve passed, this will make you solely responsible for that debt and will have to pay it back.
Are There Any Exceptions?
In addition to being a cosigner, you could also have to pay the debts if you’ve lived in a community property state and jointly owned it with the deceased.
You could also be responsible for the debt if you’re a joint account owner on a credit card, for example. However, being a joint owner is different from being an authorized user. An authorized user is not responsible for any of the amount owed left on the account.
Some state laws also require that living relatives who aren’t spouses are responsible for different types of debts. This might not be reported often, but it could mean that an adult child could be legally responsible for their parent’s medical debt.
The person’s healthcare provider will also factor into this. For example, if they had Medicaid, the government can’t recover that debt unless they have proper documentation.
Each case and situation can be different. If you’re not familiar with the probate process, talking with an experienced lawyer will help you understand how the debts will be handled.
What If There Is No Will?
Some people pass away with unpaid debts and don’t leave a valid will behind. When this happens, it means that they died “intestate.”
Now, the estate will be distributed according to state law during the probate process. The probate process is already confusing and time-consuming, and having state law dictate it can make it even more confusing.
Should You Hire a Probate Lawyer?
If there’s no will, it would be best to hire a probate lawyer to help with the process. However, there are other situations where it can help to have a professional on your side.
You should hire a lawyer as soon as possible after the death. It might take some time to find the will. You’ll need to take the will to the court within thirty days after the person’s death.
Some states have different requirements for probate, and your lawyer will be able to help walk you through the process. However, there isn’t a legal requirement for you to have a lawyer.
When handling the estate, there are so many ways you could make a mistake. One of these mistakes could make the probate process even longer, and it could affect the repayment of debts. This is why it’s always best to have a lawyer on your side to double-check everything.
Handle Unpaid Bills in Probate
Each case of debt in probate can present its own challenges. If there is a large amount of debt, it might be better to work with a probate lawyer.
They’ll know all of the laws and procedures on how to handle the debt so that you don’t have to worry about it.
If you’re looking for a probate lawyer to help with your case, contact us today.