The right of creditors to pursue repayment is protected under the law. Businesses can file lawsuits against individuals and even other companies. Creditors can request judgments that allow them to garnish wages or place liens against high-value assets.
Unfortunately, such collection efforts may only lead to very slow repayment of the amount owed. Sometimes, people who owe substantial debts die before they fully reimburse their creditors for their financial obligations. If there is a co-signer, that surviving debtor may become responsible for the entire balance due. Without a co-signer to hold accountable, creditors may worry about collecting on the debt.
What happens when a person with substantial debts dies with a balance still due?
Their estate may need to pay their debts
Contrary to what people sometimes assume, debts don’t just disappear when the person who owes money dies. The property they hold solely in their own names becomes the property of their estate. The debts that they owe also become the responsibility of their estate.
The personal representative overseeing the probate process has an obligation to notify parties with an interest in the estate of their appointment to their position. They do so by directly communicating with known creditors and publishing formal notice for those that they cannot identify through financial records and direct correspondence.
Creditors can then make a claim in the Ohio probate courts requesting payment for all relevant and valid debts. The personal representative has an obligation to pay those debts before distributing assets to beneficiaries. If there aren’t enough assets to cover all of someone’s financial obligations, then the estate has to prioritize certain debts over others.
In cases where personal representatives default on their obligations specifically because they distribute assets to beneficiaries and do not retain enough to pay creditors, those owed money by the decedent may have the necessary legal grounds to take action against the personal representative. They could be directly financially responsible for the value of the assets that they improperly distributed.
Making a timely probate claim is of the utmost importance for creditors seeking to collect on a debt after a debtor dies. Creditors who learn about their different options for recovering a debt potentially hold others accountable for misconduct and mistakes during the probate process.