Most creditors are understandably keen to recover any money owed to them. That wish won’t just stop because a person who owes them dies.
Understanding the laws around this is essential whether you are making your estate plan and worried about leaving debt or dealing with the estate of someone who died with debt,
How will creditors find out?
When a person dies, the person executing their estate must notify any creditors the deceased owed money to. They also need to publish a notice of death in assigned places to give the chance for any creditors they were unaware of to come forward.
Creditors then have the right to lodge a claim against the estate. Some might not bother, but some may. The executor then has to coordinate with the court as to how to pay them. They’ll use money from the estate to do this. If there is enough to cover all claims, then all creditors might get the full amount they are due. If the estate is lacking in funds, then the court will decide how much each will get.
Will any individual have to pay back a creditor?
The executor will not need to use any of their own money to pay the deceased’s debts. Family members usually won’t have to either. The exception is if a particular person is jointly responsible for a debt, such as if they co-signed for a loan or shared a joint credit card with the deceased.
Of course, not all creditors will play by the book. Some may pressure the executor or family members of the deceased to pay back debts. Having adequate information about the law, your rights and obligations is therefore essential.
