Are heirs responsible for deceased Unsecured loan

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    • #4107

      Our Dad passed away last year. Our mother died in 2017. We have opened a succession (there are 6 adult children). We are in the process of trying to sell his house, but have been advised that the sale will cover paying off the existing mortgage. There is a $15,000 unsecured loan in our father’s name – are we responsible for that loan? Can the bank put a lien on oil lease income that we will be getting?

    • #4111

      Usually a creditor will file a proof of claim in a succession. At that point you have classes of creditors and ranks of privilege. So, first comes administrative expenses, like court costs and attorney fees. Next comes secured creditors who usually are secured by a mortgage on a particular asset like a house. Then there are unsecured creditors who normally take a share on what is left over.

      A big point to remember is that heirs are not personally responsible for any debts. They cannot be obligated for more than they receive or will receive. For example, if you have a gross estate worth $100,000 but debts total $150,000, you have a net estate of -$50,000. No heir is responsible for that minus figure since they can each refuse their inheritance -just walk away. Now, that is not to say that you can’t negotiate a deal with creditors and get then to agree to take pennies on the dollar.

      As for the bank’s $15,000 claim, the bank would have to file a proof of claim in the succession to get paid, heirs have no personal responsibility. The oil lease income, assuming that is a succession asset, would be something that creditors of the estate could have rights to. It really takes an experienced probate lawyer to decide the best strategy in this situation.

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