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How Does Probate Address the Deceased's Debts?

When a family member passes away, the estate is settled through a court-directed probate process. Not only does the person’s estate include personal property and real estate holdings, but liabilities are also part of the estate. It’s common for people to owe money on medical bills and credit cards, which means that these balances are left unpaid.

Paying Debts and Balances

Not only does probate review the person’s will to pass property to beneficiaries, but the court also determines how creditors are paid. These debts are owed in the amount that was due at the time of the person’s death.

Family members settling a loved one’s estate can look through the person’s files and mail to find statements for accounts that might be due. Look for credit card documents, auto loans, mortgage information, invoices, medical bills, and other documents that indicate money owed. This information will be important in probate so the judge can determine the best approach to settle the bills.

Sometimes, settling the bills is simple because there is money available in the person’s bank account to pay these expenses. If cash isn’t available, then other methods need to be determined to pay the debts. For example, the executor of the estate might need to sell the deceased’s property to generate cash. The payment of debts always comes first before the property is distributed to beneficiaries.

Do Family Members Need to Pay the Debts?

What happens if the debts are bigger than the value of the estate? Since creditors get paid before beneficiaries, it means that beneficiaries might receive nothing after the balances are paid. When the estate isn’t enough to cover the balances, then the creditors may end up with a smaller payment.

In most situations, you won’t need to repay the balances with your own money. The exception is if you were a cosigner on the loan, which means that the creditor can come after you for the payment.

Working with a knowledgeable probate lawyer is a good strategy to avoid paying the outstanding balances on your own. If you are preparing to go through probate, then it’s time to call our team at Miles & Hatcher, LLP. Contact us right away to book a consultation: (909) 481-4080.

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