How Creditors Manage Unpaid Debts When a Person Dies
Introduction
In the event of a person's death, creditors have specific procedures and rights to manage unpaid debts. This article explores the steps creditors take and the legal framework within which these actions occur. Understanding these procedures can help beneficiaries manage their estates more effectively.Claiming Against the Estate
When a person dies, the debt that was owed can be claimed by the creditor from the deceased's estate. Creditors are often considered preferred creditors, and inheritance proceeds will only be distributed after all debts have been settled. In some cases, inheritors may request discounted settlements, especially if there are no assets to pay off the remainder of the debt.Filing a Claim Against the Estate
The process of managing unpaid debts for the deceased is seamless when the estate is probated. Typically, when an estate is being probated, there will be a newspaper ad for anyone who may have a claim against it. The contact person or entity listed would be responsible for receiving and processing these claims.The Role of the Will in Probate
If the deceased left a will, and the will is presented in court for probate, creditors have a specific period to file their claims. Failure to file a claim within this period will result in the claim being barred. This period is known as the 'statute of limitations' and is essential to ensure that creditors do not unduly delay the probating process.Collecting Debt From the Deceased's Estate
In England and Wales, creditors must lodge a claim against the estate where there are assets available to settle the debts. If the estate is insolvent, creditors' rights to recover debts can be terminated. Here’s a personal anecdote:In the case of my mother's death, I was the sole recipient of her estate and the executor. I had to arrange her funeral and managed to add some personal touches to it, as she specified in her will. There was some money in her bank account, and some benefits were due, but I ended up with nothing after the funeral expenses.
A few months later, I was contacted by a debt collector who had received communication about a debt my mother had entered into. When I informed him that she had died and I was only receiving her post, he insisted that I should start making payments. He completely ignored my statement that the estate was insolvent and continued to pressure me. I advised him that he could either obtain an interim injunction at his expense or leave me alone. No further contacts have been made since then.