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Debt relief after death

Those overwhelmed by bills in Salem long for the day when debt relief arrives. Many believe that day will only come when they die. According to the results of a national survey reported by CreditCards.com, 18 percent of Americans believe that they will die while still in debt. While they may view that as the end of their own financial struggles, the expenses linked to their estate still remain. It then falls to their estate executors to worry about settling their outstanding debts.

The good news is that creditors typically cannot go after an executor’s personal assets to settle the debts of an estate (unless, of course, the executor owned any portion of the debt). The bad news is that settling an estate with enormous debts can be quite a challenge.

Federal law prohibits an executor from declaring bankruptcy on behalf of an estate. Instead, it is expected that he or she will sell off the estate’s assets in order to settle its liabilities. However, in some cases, those liabilities may be well in excess of the overall value of the assets.

In such a case, the executor can then petition the State to have the estate declared insolvent. New Hampshire law requires the executor to petition the probate court for such a ruling. In the petition, he or she must include:

  •          The total value of the estate.
  •          The contact information for all known creditors.
  •          The amount owed to each creditor.
  •          If the decedent had a revocable trust, and if so, the value of any trust property.

The executor must also notify the creditors of the petition. If no objections are made, the court can choose to declare the estate insolvent and have its remaining assets dispersed according to the State’s own predetermined creditor hierarchy.

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