Paying Off the Debt of the Deceased

In the event of the death of a loved one, after some time you will learn that their debt is beginning to accumulate. When it comes to money, in our spending we often like to assume that money grows on trees, and quickly we realize that it most definitely, does not. After the death of a loved one, we may wish to hear that the debt simply disappears, and yet this is not the case either. When a loved one dies, such as a parent or grandparent, someone will always be responsible to make sure that debt is paid off. And depending on how things are established will determine whether their estate is solvent or insolvent after they pass away.

First, we will look at what a solvent estate means. This is the case in which the deceased has left enough property, assets, or plain money behind to pay off the remains of their debt after they die. Basically a solvent estate means that when they die, the total value of all assets to their name is greater than the total sum of the debt that they owe to any creditors. If this is the case for the deceased, then the personal who has been chosen in the estate plan as the representative of the estate will be the one who is in charge of making sure that all debt is paid off from the current assets and property. An example of this would be if the deceased had incurred years of medical bills and credit card debt before passing away from their illness. Perhaps the total debt to his or her name was about $60,000. Their estate would be considered solvent as long as they had assets valued higher than their debt. Perhaps their home was paid off entirely and was valued at half a million dollars. Once the credit card debt and the medical bills were paid off, then the house along with other assets to the deceased name would be spread out by the representative of the estate to whom the deceased had established in either their revocable living trust or last will and testament.

An insolvent estate, on the other hand, would be when the deceased debt surpasses that of their assets leaving a negative number once the creditors begin to receive their dues. Perhaps the same person as mentioned above had $300,000 in medical debt and yet they only had $200,000 worth of assets to their name. This would mean that there is still a deficit of $100,000 that the creditors still need to have returned. Sadly, if this is the case, the descendants are the ones to pay for the deceased debt and it is up to them to work out some form of repayment plan in order to make sure that the creditors receive what is owed. Depending on the state you live in will determine the different laws that apply to your state, along with various federal laws that need to be considered during this time. Here the descendant will need to figure out how the repayment is best spread out whether some creditors will establish payments and others receive payment in full, and so on. In some states, credit card companies will actually be responsible for paying some of the debt that the deceased owed, therefore helping the descendants a bit.

Whatever the case may be for you and your loved ones are sure to contact a probate attorney immediately before proceeding with this complicating process. Please use our website today to find a trusted lawyer near you!