DEALING WITH DEBT AND CREDITORS IN PROBATE
Probate in Missouri can be complicated. When dealing with debt and creditors in probate, the entire process can become extremely complicated. As a probate attorney St. Peters, Missouri, I know that handling creditors correctly can leave beneficiaries and heirs with more of an inheritance in their pockets.
This article will offer some advice in dealing with probate creditors immediately after the death of a family member.
Who Is Responsible For Debt When A Person Dies?
With very few exceptions, in Missouri the estate of a person is responsible for the debts, but not the individual family members or beneficiaries. By estate, I mean that a creditor can only reach the assets of a deceased debtor through the probate process in a court of law. If no estate is opened (maybe because of very good estate planning), then creditors cannot reach any of the deceased’s assets.
What Are The Exceptions?
First, when the deceased has a debt that is owed by more than one person, then that other person remains liable for the debt. The classic example would be a mortgage owed by a husband and wife. If wife dies, husband still owes the balance of the mortgage.
Second, in most cases, when a person personally guarantees a debt of the deceased. Example: Sam buys a car and because of his credit, Sally has to personally guarantee the loan to the car company. Sam then dies. Sally is most likely responsible to pay the debt of Sam because she personally guaranteed Sam’s loan and when he died, she must pay the loan.
What Steps Can Creditors Take Outside Of The Probate Process?
Creditors will often not know that a person has passed away until they are informed by a family member. Creditors with secured assets (like a mortgage holder for a home or a note holder for a vehicle) can take back the home or vehicle of a deceased if the mortgage / note is not paid.
In other words, if Sam creates a beneficiary deed attorney near me and leaves his home to Sally when he passes away, Sally would have an equitable interest in the home subject to assuming the mortgage that Sam had or, just as often, re-financing the mortgage. The bottomline in this example is that Sally doesn’t inherit more than the equity that Sam had in the property when he died.
Can A Creditor Force An Estate To Be Opened?
Yes, but in limited circumstances. A creditor can file a Missouri Application of Creditor For Refusal of Letters if the value of the estate is under $15,000.00 and the deceased did not have a surviving spouse or unmarried minor children.
How Long Does A Creditor Have To Collect A Debt From The Deceased?
If a probate has been opened, the creditor has six (6) months from the date of publication of notice. If no probate has been opened, any creditor debt is no longer valid after one (1) year from the date of death.
Should I Pay Utility and Credit Card Balances Of The Deceased?
I ordinarily advise that these types of bills not be paid unless they are needed. An example would be paying the water bill for a home if the home needs to be sold, or the heating bill if it’s winter and the house is vacant. As for credit card debts, if there will be an estate, I sometimes recommend a credit card bill be negotiated to a lower amount. However, if an estate is opened, often a creditor card company will make claims but those claims can be successfully defeated in some cases.