Who Is Responsible For My Debt If I Die?

responsible ror debt if someone diesWhen you die, will your property be sold to pay your creditors? Are your loved ones required to pay your debts even if you don’t have enough assets to cover your debts? Because the answers to these questions can be complicated depending on your situation, it is important to seek the advice of an experienced bankruptcy attorney and estate planning attorney.

The Chris Wesner Law Office, LLC handles both estate planning and bankruptcy matters. Therefore, we have the knowledge to help families and individuals as they seek to protect their assets and loved ones from creditors both before and after death.

The Probate Estate

When a person dies in Ohio, the estate is responsible for the payment of any debts the person owed at the time of his or her death. The representative of the estate is responsible for reviewing each claim against the estate and either paying the debt or objecting to the debt. After all legal debts are paid, the balance of the estate is distributed to the heirs according to the will or intestate law.

If the decedent did not have sufficient assets to pay his or her debts, Ohio law dictates which debts are to receive priority for payment. Ohio Revised Code §2117.25 sets forth the order in which debts are to be paid by the estate’s representative when there are insufficient funds to pay all debts. The way Ohio law prioritizes debts in an estate is similar to the way the Bankruptcy Code prioritizes debts to be paid in a bankruptcy case. Each creditor falls within a certain “class” for the purpose of prioritizing debts. For example, costs and expenses related to the administration of the estate are paid before funeral expenses, and funeral expenses receive priority over medical expenses.

Are Secured Debts Handled Differently in An Estate?

Secured debts are treated differently from other debts in an estate. A secured creditor holds a lien on property of the decedent such as a car or a home. If the debt is not paid, the secured creditor can seize the property to satisfy the debt.

This can create a problem for co-owners and heirs if the co-owner or heir is unable to take over payments or pay the lien in full. In some cases, a co-owner or heir may consider filing bankruptcy to protect his or her interest in the property if it is impossible to repay the debt.

Co-signed Debts and Joint Accounts

Likewise, joint debts can present a problem after death. The law does not require that family members or heirs use their own assets or funds to repay debts of a loved one when he or she  passes.  Unfortunately, some creditors aggressively pursue and harass loved ones to repay debts they are not legally liable to repay. A bankruptcy attorney can help family members who are being harassed to repay debts of a loved one.

However, if you are a co-signer on a debt, you are legally liable for the entire debt if the other co-signer refuses to repay the debt or passes away before the debt is paid in full. The creditor can take any actions allowed by law to collect the debt, including filing collection lawsuits and repossessing secured property. A co-signer should consult with a debt relief attorney if he or she receive notice from a creditor that a debt is owed in full because the probate estate is unable to pay the debt.

Is All Property Subject to a Creditor’s Claim?

Most property can be liquidated to pay the debts of a decedent. However, some property is exempt from the claims of creditors. For example, accounts that pass directly to a designated beneficiary outside of the probate estate, such as a life insurance policy or a retirement account, are exempt. Likewise, property that is held in a trust is typically exempt.

Call an Experienced Ohio Bankruptcy Attorney

If you have questions about estate debts or bankruptcy matters, we urge you to contact The Chris Wesner Law Office, LLC for a free consultation with an experienced bankruptcy lawyer. We have locations throughout the Miami Valley, including Dayton, Troy, Piqua, Xenia, and Springfield. Please call our office at 1 (937) 339-8001 or use the contact form on our website to speak with a trusted and compassionate attorney and get help today.

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