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Originally Posted On: https://lovelacelawpc.com/debts-in-probate-part-1-general-overview/

We’re all a little too painfully familiar with the topic of debt. Whether it’s credit cards, medical debt, student loan debt, a car note, a mortgage, or anything in between, we’ve all experienced that all-to-familiar feeling when a big portion of our paycheck goes to paying those things off.

But what happens when you die and aren’t around to pay anymore? Do they disappear? Are they simply written off? A lot of people seem to think so. However, in Texas, even after you die, those debts are still there, and it is the responsibility of your estate to make sure they are dealt with.

The good news is that there are many strategies and tools that probate attorneys have that can help estates handle these debts.

Types of Debt: Secured VS. Unsecured

When dealing with debts in a probate estate, the first thing to ask yourself is, “What kind of debt is it?” Generally, debts fall into two categories: secured debt and unsecured debt.

Secured debt is a debt that is “secured” by tangible property. The most common examples of this are debts like a mortgage or a car note, where the house and car, respectively, are the security for the debt. This way, if you fail to make timely payments on the debt, the loan company can come after the house or car in a foreclosure or repossession to make up for the nonpayment.

On the other hand, unsecured debt is essentially all other debt. The most common forms of unsecured debt include credit cards and personal loans. The category that the debt falls under can determine the tools and strategies available to deal with them.

How the Probate Process Starts

One big thing to understand is it is hard to hide from creditors during probate. In fact, a necessary part of the probate process is giving notice to all creditors, secured and unsecured, that the Decedent has passed away and that if there is unpaid debt, to submit a claim with the estate.

This notice is generally done by mail or by publication in a local newspaper. In order for the creditor to try and get paid, they must submit this claim to the estate’s representative. The style and form of the claim submitted can vary, but it still needs to be submitted in order for the estate to consider it.

Deadlines During the Probate Process

For both estate representatives and creditors, it is important to remember that there is a deadline to file these claims. Generally, creditors must file their claims while the estate is open and before the applicable statute of limitations bars their claim.

What is a statute of limitations? A statute of limitations is the deadline a plaintiff would normally have to sue a defendant for the harm they have done. For example, nonpayment of credit card debt would likely be considered to be a breach of contract.

In normal circumstances, if someone breaches a contract by refusing to pay their credit card, the credit card company would have a statute of limitations of four years to sue the person refusing to pay.

For claim purposes in probate, the creditor must file their claim in the same four-year span. The length of a statute of limitations varies depending on the harm done. However, for debts in probate, breach of contract (and the associated four-year statute of limitations) is the most common.

Handling Debts in an Estate

Generally, once a claim is submitted to the estate, the representative of the estate (who is also referred to as an “executor” or “administrator) has thirty days to accept or reject it. If the claim is ignored, then the claim is considered to be rejected. The danger of rejecting a valid claim is that the creditor could file a lawsuit against the estate for the rejection and fight the claim that way.
Keep in mind that this is only a general overview of how debts and claims are handled in probate. In Part 2 of this series, I’ll go over strategies that probate attorneys employ to help contain – and even avoid – these probate debts.

For claim purposes in probate, the creditor must file their claim in the same four-year span. The length of a statute of limitations varies depending on the harm done. However, for debts in probate, breach of contract (and the associated four-year statute of limitations) is the most common.

Need Help Handling Claims Against An Estate? Contact Our Fort Worth Probate Attorneys

Probate law can be very specialized, so it is important to hire an attorney who is experienced in probate to make sure you are taking all the necessary steps to help address these concerns.

The attorneys at Lovelace Law specialize in navigating probate matters and are here to help. Schedule a free consult, and let us take the uncertainty out of the probate process for you.