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What happens to creditor claims when estate assets run out?

On Behalf of | Mar 31, 2022 | Creditor Claims |

Some people die in the same way that they lived. They have more debt to repay than assets to cover those costs. If there are co-signers for any of those debts, creditors can continue to pursue repayment from the co-signers. Otherwise, an estate claim is necessary to recoup a debt owed by someone who is now deceased.

Whether you received direct notice from the executor because they knew you were a creditor or you read a public notice in the newspaper about probate proceedings, you have to file a formal claim with the courts to receive payment from the estate’s assets.

What happens if the estate uses all of those assets before paying you for the debt?

A careful review is necessary

When a creditor doesn’t get paid with estate assets, they may still have rights. Looking carefully at the financial administration of the estate can help you decide if you are in an external position. If the executor realized there were too many debts to pay them all, they should have provided information to the probate courts so that the courts could prioritize the debts for repayment.

The executor then needs to liquidate estate assets and handle the debts in order of priority. Provided that the executor follows these steps properly until they exhausted all the estate assets, any remaining creditors may not have any options left. However, if the executor paid the debts in the wrong order of priority, meaning they paid someone with a lower claim than yours before you, you may be able to take action.

Additionally, if you uncover that beneficiaries from the estate received assets while creditors went unpaid, the executor could be responsible if you cannot recover those assets for the repayment of the debt. 

Estate collections can quickly turn complicated

A creditor’s rights to make an estate claim are basic and easy to enforce. However, it can be more of a challenge than people expect to receive payment in full from an estate after someone dies. Only with the right knowledge and help can creditors maximize chances of receiving payment from an estate.

Learning more about your rights as a creditor can help you manage a potential estate claim as a creditor.