Dying in debt: What happens next?

It’s no secret that millions of Americans are struggling with debt. Most Americans start accruing debt in early adulthood and continue to pay off and accrue more debt over the course of their lives. 

But what happens to all that debt if a person dies unexpectedly, or if an elderly person dies with massive debt? 

When a person dies, any creditor with legal claims can place a claim against the decedent’s estate. Those claims become part of the process of probating the estate. 

Assuming that there are assets in the estate to pay the claims, a Judge will eventually oversee the payment of any valid claims before closing the estate and discharging the Executor.

Sometimes a person dies with more debt than there are assets to distribute. Then what?

In most cases, a Judge will decide on pro-rata shares to be distributed to the claimants. That means that each claimant would receive a portion of their total claim, based on the total value of the assets in the case. 

In cases where there is debt and there are no assets, those claimants will be forced to take a loss on the unsecured debt. 

If you are concerned about a loved one’s debt and the implications it could have on their estate contact our office to discuss your individual situation.

We specialize in educating and helping you protect what you have for the people you love the most. Contact us to learn more about how we can help.

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