What happens if the decedent owed money?
Many people die leaving large sums of debt, which could be to secured and unsecured creditors, banks, and also in taxes. Part of the probate process is to ensure that all creditors are given the opportunity to claim what is due to them from the deceased’s estate. All of the claims are then handled through probate, and it is the executor’s job (amongst others) to ensure that these debts are paid in accordance with the law of that particular state.
It is the executor of the will (which is generally the person named by the decedent) that will deal with these claims, and this is overseen by the probate courts. It is the executor’s responsibility to ensure that all creditors are contacted and advised that they must file a claim within a certain time frame (usually around three months) in order to get the opportunity to recover their investment.
Generally, when a will goes to probate any creditors to whom the decedent owed money are contacted in writing. They are given a set deadline by which time they must file and prove any claims that they have against the estate. Once this deadline is reached, they no longer have any claims against the estate.
Once the claims have been received, the probate process will look at how much is available to pay these debts. If there are insufficient funds to pay every creditor, state law (which can differ from state to state) will ascertain which creditor gets what. Assets are generally sold off in order to make the payments to creditors, and if there are still insufficient funds payments are calculated pro-rata so that each creditor receives a portion of what was owed to him by the decedent.
The claim must be approved by the executor before any payment is made to a creditor from the estate. In the event that the claim is rejected by the executor, the creditor would have to take legal action to claim his share of the estate. The creditors that are invited to file claims may be owed money on secured or unsecured loans, taxes, credit cards, hire purchase agreements and services rendered.
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2008-04-07 12:21:18
Probate is the legal process of settling a deceased person's estate, which includes paying creditors or debts, and distributing the assets of the deceased to the correct beneficiaries. It is a complic ... [read more]