This post addresses your rights and options when dealing with a deceased person’s creditors. Our prior article discussed the next steps when someone offers an invalid will for probate in a Texas court. When dealing with a deceased person’s creditors, you have an entirely different set of options. In fact, you likely have more rights than you realize.
Creditors in Texas Cannot Seek Repayment from a Deceased Person’s Family or Beneficiaries
A deceased person’s debt does not vanish upon their death. Creditors may still enforce their claims against the estate of the deceased person. They cannot, however, seek repayment from the deceased person’s heirs, beneficiaries, or family members, with a few small exceptions.
Spouses can be liable for debt incurred by a deceased spouse for necessities like food, clothing, housing, and medical expenses. Co-signers like those who sign a guaranty can be liable for the debt they co-signed. Also, creditors that have collateral for the deceased person’s debt can, in effect, force the person who inherits the collateral to pay the corresponding debt. For example, a mortgage lender usually has rights to foreclose on a deceased person’s property if the deceased person’s mortgage is not paid, and vehicle lenders can often repossess the vehicle if the deceased person’s debt is not paid.
In the vast majority of cases, however, creditors cannot directly assert their debt against the deceased person’s family, heirs, and beneficiaries.
The Probate Claims Process in Texas Can Discharge the Deceased Person’s Unsecured Debts
We often see a deceased person’s family members pay off the deceased person’s debts. Sometimes this is one of the first things they do after the deceased person’s death! Undoubtedly, they are trying to do the right by wrapping up the deceased person’s affairs. As it turns out, though, this practice is often unnecessary. Although most people are unaware of the probate claims process, it can substantially reduce a deceased person’s debt or even eliminate the debt entirely.
After a probate case is filed, the probate courts will eventually appoint one (or, in rare circumstances, two) “personal representatives” of a deceased person’s estate—an “executor” if the deceased person left a will, and an “administrator” if the deceased person died without a role. The personal representative is the only person with authority to speak and act on behalf of the deceased person. That includes dealing with creditors. Texas law provides personal representatives with powerful tools for eliminating a deceased person’s debts. First, they can send a special letter to the creditor, which alerts the creditor that (a) the person died, (b) there is a probate case pending, and (c) the creditor must present a claim for repayment to the personal representative within 120 days. The creditor must then prepare a claim document with specific documents and present it to the court or to the personal representative within the time limit. If they fail to do so, then the deceased person’s debt is entirely discharged. Depending on the circumstances, there may be additional tools for the personal representative to use to discharge the deceased person’s debt.
The probate claims process can be used against all forms of unsecured debt, meaning debt that does not attach to collateral. In other words, the personal representative cannot discharge debts like mortgages and vehicle loans. Overall, though, the probate claims process is surprisingly effective. Sometimes, family members will decline to probate an estate because they believe creditors will take their entire inheritance. They fail to realize that the probate claims process may protect their inheritance.
We recommend that you speak with a probate attorney before paying off a deceased person’s debt or deciding that probate will not be worth the cost. You may be in for a pleasant surprise. Our Texas probate lawyers regularly assist clients with advice and evaluations of their inheritance rights, including the effect of Texas creditors against a deceased person’s estate. If you need help determining whether probate is advisable, or how to maximize your inheritance by discharging creditor claims, contact us any time. Our attorneys are standing by, and we are ready to assist clients in Dallas, Plano, Frisco, McKinney, Denton, Fort Worth, Garland, Irving, Austin, Houston, San Antonio, Nacogdoches, Lufkin, and Center.
In our next post, we will address another type of inheritance dispute—the rights of a deceased person’s spouse to collect community property and claim Texas statutory rights. Texas law provides spouses with rights to collect an inheritance, of sorts, from a deceased person’s estate, even if the deceased person’s will cuts them out entirely.