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What Actually Happens To Our Debts When We Die?


When you die, your debt just becomes a liability of your estate. Your estate is obligated to satisfy the debt in the same way you would be required to satisfy the debt, if you were still living. Your estate consists of all the assets you own and any other rights. If someone owes you a debt when you die, your estate can collect that debt.

Are We Responsible For Our Spouse’s Debts?

In California, we are generally responsible for our spouses’ debts because we are a community property state. Any debt that was acquired during the marriage is presumed to be the debt of both spouses, even if only one spouse was named on it. There are some exceptions. If the debt was acquired prior to the marriage, it is presumed to be the separate debt of the spouse who acquired it. If the parties have a prenuptial agreement or a post-nuptial agreement that states that their debts will remain separate and the person acquiring the debt informed their creditor that it was going to be their separate debt, then it would only be the debt of the spouse who took it out. In order to do this, the one who acquires the debt cannot rely on the spouse’s income or assets to qualify for that debt.

What Happens To The Debts Of Our Children Or Parents?

There is absolutely no responsibility for a debt of someone other than a spouse. If anyone else dies, you are not responsible to pay their debts, unless you have consented to pay them by co-signing or anything of that sort.

What Potential Options Does The Court Offer Beneficiaries To Resolve A Deceased Person’s Debts?

One of the main purposes of a probate is to protect the creditors of an estate. The court will require that, as much as is possible, the estate will fully pay the debts of the decedent before the court will allow distributions to beneficiaries. The debts can either be paid out of the liquid assets of the estate or assets can be returned to the creditor, if applicable.

Once paid, the creditor releases their claim and then the court will allow for distribution. If the assets of the estate aren’t sufficient to pay the debts, the assets will be liquidated and the creditors will be paid in what is called a pro rata distribution. They would each receive a proportional share of whatever assets were in the estate and the court has to approve the distribution. Anything owed that the creditors don’t receive is simply dismissed.

Which Creditors Can Make Claim For Assets Once Someone Dies?

Any creditor who has a valid claim can make one. They have to be able to show evidence to the court that the decedent owed them money. If there is some defense to that claim, the estate can raise that defense. For instance, if the creditors let it go too long and the statute of limitations applies, the estate doesn’t have to pay. If the decedent could have avoided the debt legally, then the estate also may avoid the debt.

What Is the Timeframe Creditors Have To Make A Claim For A Deceased Person’s Assets?

Creditors have four months from the date that the personal representative is appointed to file a claim. Once the court appoints an administrator, an executor, or a personal representative of the estate, notice must be given to all known creditors of the estate. There is also a publication alerting any unknown creditors of the estate and the creditors have four months to file a claim against the estate. Once the claim is filed, the personal representative and the creditors can work out a payment, so that the creditors will release their claim and the estate can be distributed.

For more information on Debts Of A Deceased Person In California, a free assessment is your next best step. Get the information and legal answers you are seeking by calling (626) 385-6303 today.

Newell & Havens Attorney At Law

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