Deciding on Bankruptcy for A Deceased Person’s Estate
Should a Deceased Person’s Estate Go Bankrupt?
What happens to someone’s debt once they die?
Does it disappear?
Unfortunately, the situation is not quite that simple and the shocking reality is that debt can linger long after someone passes away.
That’s important to be aware of, particularly when you realize a lot of people are going to die in debt.
When someone passes away you can find various creditors trying to get money out of the estate.
If there aren’t enough assets left in the estate to pay the full costs, then creditors may start making demands to the executor of the estate.
It’s at this point that filing bankruptcy can be the best and indeed the only option.
How Does This Work?
If you are the executor of the estate for someone who is deceased, then you might find that the assets left are not enough to cover the debts.
At this point, you will need to bring an application to the bankruptcy court and attempt to obtain an order for the estate to be assigned into bankruptcy.
This will be the case if assets can not be fairly distributed between creditors.
Bankruptcy can benefit creditors by providing dividends through a prorated basis.
The remaining creditors are then part of the bankruptcy’s estate.
Are There Alternatives?
There might be alternatives to filing bankrupt with the estate.
This is always going to depend on the level of assets that are available and the level of debt that is owed to creditors.
Remember, creditors’ debts will always need to be settled before any assets can be passed on through a will.
Creditors’ costs will always take priority in cases like this.
Can The Debt Be Passed On?
You might be wondering whether the debt of a deceased individual can be passed on after someone dies.
For instance, is it possible for debt to be transferred to dependents of the deceased?
Legally this is not possible and creditors should never pursue dependents for money that they are owed.
The issue people often run into is that they were accountable for debts that they weren’t aware of until someone passed away.
Joint debts that are legally held by two people are not erased when someone passes away.
This is why you need to make sure that you are aware if you are accountable for paying off any debt.
We hope this helps you understand some of the key issues with the debt of a deceased loved one and what to do if you find yourself in this situation.
If you need more support with debt relief we can help.
We have supported more than 100,000 Canadians on their road to debt recovery and we’re confident we can assist you as well.
Get in touch with a friendly member of our team on the phone or fill out a free evaluation form online.