Resolving Debts During Probate

Alameda County Probate Lawyer

When someone passes away, the property and assets they owned might not necessarily be distributed to their loved ones. If they passed away with outstanding debts, creditors could have their say in the value of the estate first. It all depends on the situation.

At Sargent Law Offices, our Alameda County probate attorney is here for you when you are dealing with a will going through probate that involves significant debts. When you allow us to handle this delicate situation, we may be able to find a way for you and your family to hold onto the property of the decedent, even when banks and creditors are expecting monies first. Be sure to call us at 510.344.2599 today if you have any questions.

Secured and Unsecured Debts

If a debt is unsecured at the time of its owner’s passing, creditors likely have a chance to get as much value out of the existing estate as possible, up until the debt is paid off. Most of the time, this will be done by appraising and selling off pieces of the estate. Only what is left over after this is done will be distributed during probate, regardless of what the will intended.

Creditors may sometimes seize or sell the following to collect on owed debts:

  • Homes
  • Automobiles
  • Family heirlooms
  • Savings accounts

If a debt is considered “secured,” it is more or less tied to a particular piece of property, usually some real estate or a vehicle. In such a situation, the property can be distributed according to the will during probate, allowing loved ones to inherit it without fear of creditors coming for it. The catch, however, is that the debt will be transferred to its new owners. For example, if your loved one owed $10,000 of secured debt on a car and you inherited that car, you now owe $10,000 to the same party.

Probate and Funeral Costs

Probate court and funerals may be costly, and the decedent’s estate is usually used to pay for them. Even in situations where the decedent has outstanding loans, the value of the estate will most likely be applied to probate, funeral, and burial expenses first. If this exhausts all potential finances from the estate, creditors may not be able to collect anything at all. Although this would also likely result in a situation where loved ones inherit nothing either.

Debts Can Go Both Ways in Probate

Not all unresolved debts are owed by the decedent. There is the real possibility that your loved one was owed money at the time of their passing.

This can be resolved in one of two ways:

  1. Reverse gifting: Forgiving or erasing owed debts as a gift.
  2. Collection: Adding the value of an owed debt to the estate itself.

To put the idea of collection into more specific terms, consider this example: you owe the decedent $5,000 and the decedent owes $5,000 to their bank. If they do not forgive your debt in their will, you could ultimately owe $5,000 to that bank, as it was meant to go to the estate in the first place.

Have Questions? We Have Answers!

Money is a sensitive enough topic as it is without the addition of the passing of a loved one. When you need to tackle the problem of debts during probate, do not put it on your shoulders alone. Instead, let Alameda County Probate Attorney Hannah Sargent handle it for you. The legal counsel and guidance she provides is invaluable, and you can learn that for yourself through a free consultation!

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