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Debts and Deceased Relatives

Wills & Estate Planning

This article answers frequently asked questions on debt management and communication about debt after a debtor’s death.

Debts survive death, but the discussion doesn’t end there. Both Texas and federal law set up procedures that must be followed for debt management after death. The law also sets up safeguards to protect certain assets (money or other items of value) left on someone’s death from being reached by debt collectors. This article helps to outline the basics of debts and deceased relatives, and guides the reader on debt validity, authority to manage debts after death, and highlights some authorized exemptions from debt recovery.

Does a debt go away when the debtor dies?

No. A debt collector can try to make a claim for payment on an alleged debt against a deceased person’s (decedent’s) estate, or even against a person who directly receives a decedent’s money. 

However, just because a claim might be made doesn’t mean it is valid, or that it must be paid. 

Texas law sets out many steps that must be followed by debt collectors in order to make a claim, and even more regulations on when valid claims must be paid. 

Talk with a lawyer if you have questions about estate debts, and whether they are valid and must be paid.
 

What are some examples of when a debt doesn’t have to be paid?

There are several reasons alleged debts, or claims made against an estate, do not have to be paid. 

  1. There might not be enough money to pay the debts. This is known as an “insolvent” estate.
  • Insolvency arises when more debt remains at death than assets, or when the money that is left is secured for family allowances and/or exemptions.
  1. The debt collector may have not taken proper steps to secure a claim (like timely filing a claim in court). In such a case, the result might be the debt has a lower level of priority than it could have had, or even that it is barred altogether from payment.
  • For example, the law provides that when a personal representative gives notice permitted by Texas Estates Code 308.054 to an unsecured creditor for money and the creditor's claim is not presented before the 121st day after the date of receipt of the notice, the claim is barred.
  • A statute of limitations might also bar a debt collector from being paid. This is a certain period of time set in place by law that action must be taken on a debt for its collection to be enforced. (Talk with a lawyer if you have questions on whether a statute of limitations might apply to the estate debt you are managing.)
  1. Debt collectors might agree to settle the debt and accept a much lower amount of payment in satisfaction of their claim.
  • Talk with an estate lawyer if you have questions on settling debt or are interested in pursuing debt negotiation.

What types of estate property are exempt from debt collection?

Importantly, even when an estate has debt, the law still exempts some property, and can even provide for a family allowance.

Exempt property.

  • Texas Property Code 42.002a exempts some estate property from forced sale to pay debts, including an allowance to substitute that property. 
  • The law also provides for certain homestead protections for the surviving spouse and minor children.

Family allowance

Texas law provides that the court may set a family allowance for maintenance for the surviving spouse, minor children, and adult incapacitated children of a deceased person for one year after the death of the deceased person.

Learn more here: Texas Estates Code 353.101.

Who is in charge of paying a decedent’s debts?

A personal representative of an estate (like an executor or an administrator) might be responsible to pay a valid claim for debt made against an estate.

  • An executor or administrator is someone ordered by a judge to help manage an estate. 

Sometimes estate matters are handled outside of court, without the involvement of a judge. In this case, a surviving spouse, or other close family members manage the affairs.
 

How do I know if I need to go to court to get authority to manage an estate debt?

The type of debt and assets left at death determines if court involvement is needed, and if a personal representative must be named by a judge to act. 

How does a personal representative know which debts must be paid?

The personal representative uses the money in the decedent’s estate to pay valid debts after first applying estate money to pay:

  1. Funeral expenses up to $15,000, and last illness expenses up to $15,000;
  2. Allowances made to decedent’s surviving spouse and/or children;
  3. Expenses of administration and expenses incurred in preserving, safekeeping, and managing the estate; and finally,
  4. Other claims according to the order of claims’ classification.

In addition, the court may order the personal representative to pay certain claims, or make other orders, including ordering the personal representative to pay any allowable claims.

Learn more here: Texas Estates Code 355.001 through 355.203.

What does it mean to pay valid debts according to the order of claims?

Texas law sets up an order of priority for payment of claims.  This order of claims is set out in Texas Estates Code 355.102.

Note: A “claim” is the legal term that means a formal request to be paid money.

Estate money available to pay claims must be paid in this order, so that when someone leaves limited funds on their death, it is possible that:

  • Higher-level claims will be paid, while lower-level claims remain unpaid, or
  • Claims with the same classification level may even be paid pro rata (in equal proportions).

What are the different types of claim classifications?

Claims are to be paid in order of priority according to the following classifications set out in Texas Estates Code 355.102:

  1. Class 1 claims—these include reasonable amounts approved by the court, up to $15,000 in funeral expenses, and up to $15,000 in last illness expenses. (Expenses above $15,000 in each category are given lower priority and are classified as other unsecured claims.)
  2. Class 2 claims—estate administration and estate management expenses.
  3. Class 3 claims – specific secured claims for money.
  4. Class 4 claims—claims related to child support.
  5. Class 5 claims—claims related to taxes, penalties and interest.
  6. Class 6 claims—claims related to the cost of confinement of an inmate.
  7. Class 7 claims—claims for repayment of state medical assistance.

Class 8 claims—any other claims not described above.

Is anyone else responsible for paying a decedent’s debts?

A person might be responsible for paying valid claims for debts of a decedent if a person:

  • co-signed the debt;
  • is the decedent’s surviving spouse and it is a certain type of expense;
  • received money from the decedent on or after the decedent’s death, and that money is not otherwise exempt, or required to be set aside due to available allowances.

Even still, debt collectors must follow strict procedures to be able to make valid claims on debts, and the law sets out exemptions and allowances that cannot be reached by debt collectors. 

If you have questions about whether you are obligated to pay a deceased person's debts, talk with a lawyer.  A lawyer can advise you if there is any legal obligation to pay a debt collector’s claim, and can often help you negotiate a lower payment for full settlement of a debt collector’s claim.

Can a debt collector talk to me about a deceased person's debt?

Under the FDCPA, collectors can contact and discuss a deceased person's debts with their:

  • surviving spouse, 
  • parents (if the deceased was a minor),
  • guardian,
  • executor,  and
  • any other person authorized to pay debts with assets from the deceased person's estate. 

Read more about Debts and Deceased Relatives at consumer.ftc.gov

Tip: You may also hire a lawyer, and have the lawyer take over all debt communication for you. 

You may also be able to talk with a lawyer for free at a legal clinic. If you need help finding a lawyer, you can:

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