How Are Debts Paid After Someone Dies in California?

Very few people make it through life without taking on any debt. Some people manage to pay off their debts before they die, whereas others are unable to clear their debts before their passing. Most people leave behind credit card debts, mortgages, auto loans, medical bills, student loans, and other types of debts. When someone passes away before they complete repaying their debts, those debts do not die with them. If you recently lost a loved one and your loved one left behind debts, you may be wondering what will happen to those debts. If you are the personal representative of your loved one’s estate or a beneficiary or heir, you may be wondering how your loved one’s debts will impact you. Read on to find out what happens after someone dies and leaves behind debts in California.

Do Debts Get Inherited?

Generally, debts that a deceased person leaves behind are not inherited by estate beneficiaries, heirs, or personal representatives. However, an exception exists if there is a direct agreement between the creditor and a surviving party. For instance, if someone dies and leaves behind an auto loan, a surviving family member who cosigned the loan will be responsible for paying back the loan. Also, in community property states, such as California, creditors may be able to recover payment from the decedent’s surviving spouse even if they are not named in the debt contract.

Debts Get Paid During the Probate Process

Generally, when someone passes away and leaves behind debts, those debts are addressed through the probate process. This is a court-supervised procedure for settling a decedent’s estate, which involves, among other things, identifying and paying off a decedent’s debts.

Once the court approves the probate petition and the personal representative has the legal authority to manage the decedent’s estate, the first step is identifying assets and debts. The executor (if there is a Will) or administrator (if there is no Will) must identify which assets are subject to probate and all outstanding debts, including mortgages, credit card debts and medical bills.

After all assets and debts have been identified, the personal representative is required to notify all potential creditors of the probate proceedings. The personal representative must complete a Notice of Administration to Creditors (DE-157) and mail it to creditors. The notice must also be published in a local newspaper. Once notified, creditors have limited time to file their claims.

In California, certain debts take priority over others. During debt repayment, the personal representative is required to make payments based on priority order. According to California Probate Law Code Section 11420, expenses of administration, obligations secured by a mortgage, deed, trust or other lien, funeral expenses, and expenses related to the sickness that led to the decedent’s death must be paid first before family allowances, wage clams, and general debts.

It is crucial to note that if an estate does not have enough assets to pay off creditor debts, creditors can look to assets in which heirs might possess interest if the assets are joint accounts or community property.

Contact The Probate Guy

If you recently lost a loved one and have questions or need legal help, contact the skilled and dedicated California probate attorney, Robert L. Cohen – The Probate Guy – today to schedule a telephonic consultation.

Southern California Probate Lawyer Serving Orange, Riverside, Anaheim, Whittier & Beyond.

Source:

selfhelp.courts.ca.gov/jcc-form/DE-157