When a person who dies owes a debt to a creditor, the creditor is still allowed to claim that debt. When the creditor makes a claim, whatever is owed will be settled using the money in the estate. There are two ways that this happens: one is when a public notice is sent during the probate process and the other in the case of estates that do not require probate.

Debt Collection in Probate

When the probate process begins, a proactive announcement is going to be made in the newspaper and online and a notice will be given to the creditors. These notices will indicate the name of the deceased, as well as the name and address of the estate executor or personal representative. The creditors will then be asked to appear and claim what is owed to them from the estate.

The perk here is that the creditors only have a period of 4 months to make their claim, beginning on the day that the announcement was published. If the creditors don’t claim what is due to them within the timeframe, the assets will be divided, and the creditors can no longer collect. The time limit can serve as an advantage for the estate, but it’s also worth noting that the public notice triggers it, so it’s important to make sure that is published.

Debt Collection Without Probate

Remember that not all estate plans require probate. There will be some, like in the case of revocable trusts, where probate is not necessary, and the assets can immediately be transferred to the trust beneficiaries. Because there is no probate, then there would be no public announcement of the death of the debtor. It’s possible that the creditors might not even know that the deceased has died until it’s too late.

In these instances, the estate can avoid alerting the creditors of the debtor’s death because it doesn’t become public. The creditors have to track it down on their own. However, the downside is that the creditors will have one year to make their claim from the estate.

There are both advantages and disadvantages to going through probate or not, especially when it comes to debt collection. It’s important for people to be aware of these so that they can make the best decisions for their estate plan.